want to bring Inflation to heel? There is of course no single, simple solution, otherwise we would have done it by now. But a good start would be to wean the economy off of gasoline and diesel.
Fossil fuel prices have gone through the roof. Gas prices are up over 75% and diesel up 55% since last year, according to the AAA. There are myriad reasons for this – Putin’s war in Ukraine, an unexpected surge in demand for early shutdowns from the pandemic, an East Coast refinery that literally exploded a few years ago, and so on.
The recent surge demonstrates the folly of tying the transportation sector – which accounts for 6% to 12% of GDP in developed markets – to highly volatile consumer goods that are largely bought at spot prices.
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Diesel prices alone are driving about 17% of today’s inflation, according to Mark Zandi, chief economist at Moody’s Analytics. Inflation across the energy sector was nearly 30% in April, more than triple everything else, according to the Bureau of Labor Statistics. Giving up fossil fuels would reduce inflation by almost a percentage point.
But how do you replace diesel, which flows through so many aspects of our economy, from trucks to trains to ocean freight to agriculture? It’s not going to be easy, but it’s pretty simple: electrification.
An electrified economy powered by renewable energy is less likely to experience sudden price shocks such as those caused by oil and gas. Here’s why.
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