GLOBAL FUTURE ANALYSIS


EFFECTS | HIGHER PRICES


As the cost of credit, energy and water rises severely all products and services will become much more expensive (which powers inflation, which powers interest rates, which powers credit costs). The energy cost facet of each product/service when it reaches the enduser is totally unknown (due the decades of cheap energy). The energy cost facet of each product/service will become very clear to us in the next 2 years. Increasing energy costs reach the market with a certain delay due to purchase contracts in the whole product chain. In some sectors this chain is short. Transport and chemicals are perfect examples of this: using both a lot of oil and have a short product cycle, so the rising cost of oil reaches the market in those two sectors in very short time. Other sectors has longer time to market of the energy price rises. But everything will become much more expensive. The virtual energy cost component will burden de price of each product/service. The same applies for the virtual water cost component (the price of water used for production of a product/service). Sharp rising higher prices that are overgrowing economic growth give less purchase power and thereby economic decline. Nations with no/less debts (not exporting purchase power), own energy/water (not exporting purchase power) and actual low prosperity levels (easy to gain) will maintain economic growth rates. Other nations will face (some or a lot) economic decline. As inflation grows (and depending on the nation's status cause yes/no stagflation) interest levels will rise equally dramatically. Debt than really become a burden.


Author: Gijs Graafland


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