Draft:Fossilflation
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Inflation that is driven by the rising costs of fossil fuels, such as oil, gas and coal.
Fossilflation refers to the phenomenon of increasing costs of goods and services that is attributable to the increased price of fossil fuels like oil and natural gas. As societies are dependent on fossil fuel for the production of products and services, an increase in fossil fuel prices affects the price of other products and services.
Origin of the term
[edit]The term was popularized by economist and European Central Bank Executive Board member Isabel Schnabel in March 2022 during the Ukraine crisis and the subsequent energy crisis. In her speech, Schnabel described fossilflation as the economic consequences or "legacy cost" of prolonged dependence on fossil energy sources[1]. She argued that reliance on fossil fuels exposed economies to recurring price shocks and inflationary pressures. The 2026 Strait of Hormuz crisis and the effect this has had on oil and gas prices has cemented fossilflation as a concept that describes this economic penalty or "legacy cost" of relying on fossil fuels. A transition to renewable alternatives to fossil fuels might thus break the structural basis for fossilflation.
Economic context
[edit]Economist have long acknowledged energy prices as a significant driver for inflation[2]. Since fossil fuels are globally traded commodities, their prices are influenced by geopolitical tensions[3], armed conflict, supply disruptions, product decisions by major exporters, and financial speculation[4]. It follows that fossil fuel dependence creates a structural exposure to inflationary chocks, meaning that economies that rely on imported oil, gas or coal become vulnerable to sudden increases in energy costs that flow through the supply chains and increase the price on food, transport, housing and consumer goods.
Usage and reception
[edit]The term was adopted in financial and political commentaries following the 2022 European energy crisis[1] and the sharp spike in European gas prices that followed the cut in Russian supply due to the invasion of Ukraine[5]. Some commentators referred to this as a weaponized form of fossilflation and highlighted how breaking the structural basis for fossilflation required accelerating the reduction of greenhouse gas emissions to net-zero[6].
Fossilflation refers to inflation caused by increasing fossil fuel prices, irrespective of the reasons for this increase. It can therefore at least on short term also be a consequence of climate mitigation policies[7]. However, low-carbon technologies have been argued to offer a more durable remedy to fossilflation than an expanded fossil fuel supply[8].
References
[edit]- ^ a b "A new age of energy inflation: climateflation, fossilflation and greenflation". 17 March 2022.
- ^ "In Depth – The Impact of Higher Global Energy Prices on the Australian Economy | Statement on Monetary Policy – May 2026". Reserve Bank of Australia. 2026-05-05. Retrieved 2026-06-30.
- ^ "Geopolitical oil price shocks: Why these shocks hit harder". CEPR. 2026-04-28. Retrieved 2026-06-30.
- ^ Zaghdoudi, Taha (2026-04-01). "Geopolitical Risks and Oil Prices Bubble Activity". Energy RESEARCH LETTERS. 7 (3). doi:10.46557/001c.142278.
- ^ "Natural gas price statistics". ec.europa.eu. Retrieved 2026-06-30.
- ^ Tubiana, Laurence. "'Fossilflation' speeds up the inevitable energy transition | Context by TRF". www.context.news. Retrieved 2026-06-30.
- ^ "What is Fossilflation? | NordSip". nordsip.com. Retrieved 2026-06-30.
- ^ Wagner, Gernot (2026-04-15). "Why more fossil fuels won't fix the Iran energy crisis". Nature. 652 (8110): 544–544. doi:10.1038/d41586-026-01197-1. ISSN 1476-4687.