As the price of natural gas reached record highs in the UK and Europe—trading at the equivalent of $200 per barrel of oil, and as economic activity in China has been curtailed by the country’s power supply crunch, central bankers and policymakers from across the globe are forced to confront significant challenges to price stability, with a focus on shielding households and businesses from an increase to the cost of transport and basic goods, while monitoring the potential for price pressure and supply chain bottlenecks to upend the global economic recovery. This is important at this time, for the ripple effects of disruptions to energy markets could amplify social and political fissures that are visible across the global landscape, and which might portend complex domestic politics as many countries head into elections in 2022.

Surging demand for natural gas—and shortages and bottlenecks to supply—have resulted in a corollary demand for oil products (referred to as gas-to-oil switching), thus driving up the price of WTI crude to seven-year highs. The skyrocketing commodity price environment has led one observer to point to the “revenge of the old economy”, according to which the collective noble efforts to move toward a cleaner, greener future fuelled by renewable energy have been stymied by a recent past of inadequate investment into the capacity and infrastructure of the hydrocarbons that power our economies.

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