Are Rising Energy Prices The First Sign Of Greenflation?

Patrick Boyle On Finance

Over the last month the news has been dominated by stories of energy shortages around the world. China has seen major industrial output cuts caused by power outages over the last year, European gas prices are trading near record highs and the UK is reeling from the political fallout of a surge in energy prices.
US oil prices rose to the highest level in seven years after OPEC and its allies declined to accelerate plans to increase crude production, snubbing calls from the White House to help tackle a growing global energy crunch.
This crisis in Europe might foreshadow future difficulties in the rest of the world as the continent’s energy shortage has governments warning of blackouts and factories being forced to shut.
From container ships to cardboard, tighter environmental regulations are stoking shortages and price spikes as 'greenflation' takes a grip, adding a new twist to corporate valuations.
For all the inflation-is-transitory messages from central banks, double or triple-digit cost increases have become common on company balance sheets, although the green variety has yet to show up in bond markets, the usual early warning system.
While higher costs are partly down to pandemic-linked supply glitches, fund managers say a powerful impetus is emanating from stringent new rules to guide the world's transition to a greener future.
Aluminium, electricity and fertilizer are among sectors targeted, with others such as aviation in the EU crosshairs.
Investors largely agree greenflation is a necessary risk, because with the United Nations saying global warming is spiraling out of the control, the alternative of frequent floods, droughts and forest fires is worse. read more
The question facing fund managers is which companies will see a profit hit, which can pass costs on and which will thrive.
Patrick's Books:
Statistics For The Trading Floor: https://amzn.to/3eerLA0
Derivatives For The Trading Floor: https://amzn.to/3cjsyPF
Corporate Finance: https://amzn.to/3fn3rvC
Patreon Page: https://www.patreon.com/PatrickBoyleOnFinance
Visit our website: www.onfinance.org
Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle
Patrick Boyle On YouTube
Support the show