Chart: Fossil fuels are a big driver of inflation

Speeding up the switch to renewables will free consumers from the price volatility of dirty energy.

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Canary Media’s chart of the week translates crucial data about the clean energy transition into a visual format. Canary thanks Natural Power for its support of this feature.

We can blame dirty energy for much of the inflation we’re seeing in the U.S. Prices of fuel oil, gasoline and utility gas are soaring faster than any of the other major categories tracked by the Consumer Price Index.

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We started the year with inflation at a 40-year high of 7 percent in the U.S., and by April it had reached 8 percent compared to 12 months prior. Average energy price inflation was markedly higher, coming in at 30 percent in April. But fossil fuel prices specifically were higher still: Gasoline saw a 44 percent year-over-year price increase, and the cost of fuel oil, which is used for heating in more than 5 million U.S. households, had risen 81 percent. The problem is compounded even further because so many of the goods we buy are produced and transported using fossil fuels. The result is that rising energy costs spur inflation in other areas as well. 

Roosevelt Institute researchers Lauren Melodia and Kristina Karlsson argue in a new brief that speeding the shift to clean energy would help fight inflation. Fossil fuel prices are inherently volatile, they note, while renewable energy prices are more stable: The Federal Reserve has little power to mitigate inflation driven by fossil fuel prices [so]…the solution to ongoing energy price volatility is a government-led investment in renewable energy production and deployment.”

The electrification of cars and HVAC systems will also help curb inflation, they contend, because electricity is a highly regulated market that is not as vulnerable to price fluctuations as energy commodities. As the chart above shows, electricity prices went up by only 11 percent over the last year — far less than the increases seen in gasoline and utility gas — even though about 60 percent of electricity in the U.S. is currently generated by gas and coal. As the electricity supply is cleaned up, its price volatility will decrease, Melodia and Karlsson argue. 

The shift to clean energy and more stable energy prices will be particularly beneficial to lower-income Americans, who now must spend disproportionate amounts of their income on energy. 

Listen to Lauren Melodia and Kristina Karlsson discuss energy inflation on David Roberts’ Volts podcast.

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Natural Power is a global consultancy that supports its clients to deliver a wide range of renewable energy projects. Its independent engineering experience covers all phases of the project lifecycle, from feasibility through construction to operations, and all stages of the transaction. Learn more.

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Maria Virginia Olano is editorial and research associate at Canary Media.