What is The Relationship Between Commodity Prices and Inflation?
By Sean Devine, Director of Natural Gas Sales
Inflation is something impacting all goods across the globe and especially commodities. For the first time since 2008, the United States recorded an inflation rate of 4.2% for the last 12 months ending April 2021. An increase of 2.6% is something we are feeling at the grocery store, the gas pump, and in many other forms. The month of May came in at 5%, and the Fed is now talking about factoring higher inflation for their forward planned rate hikes. When we see inflation, commodities historically have risen along with the inflation gains. This causes a chain reaction of price increases for goods and services as the input costs to make these goods and perform the services rises. Here in the Northeast, we generate over 60% of our electricity with natural gas fired turbines. When commodities (Natural Gas) increase as an input cost, the cost of electricity supply rises as well. Whether it be WTI, Brent, Natural Gas or even Propane, these energy commodities rise as inflation heads north.
With the cost of commodities increasing, we will see the impacts in all aspects of our lives and notice that impact in our wallets. As the global economies continue to crawl out of the devastation of Covid 19 through vaccinations, demand for commodities, goods, and services will also rise. Take a look at the red hot used car & truck market, and you see demand like never before. A perfect scenario to see energy costs continue to march northward from the forward market bottoms seen in 2020.
About Freedom Energy Logistics: Founded in 2006, Freedom Energy Logistics is a leading energy advisory. The private company offers comprehensive energy supply management and renewable energy solutions supporting energy goals and sustainability objectives for businesses and organizations throughout the U.S. Freedom’s team of energy experts has worked with and delivered energy saving, environmentally responsible solutions for some of the largest commercial and industrial companies, municipalities, universities, healthcare facilities, and businesses. With its headquarters located in Auburn, NH, Freedom Energy also has employees serving clients locally throughout the regions. Freedom Energy has been twice named to the Inc. 5000 list of fastest growing companies in America; recognized as one of the Fastest-Growing Family Businesses in NH by Business New Hampshire Magazine. Stay Work Play’s Coolest Company for Young Professionals; and received multiple Business Excellence Awards from New Hampshire Business Review. For more information, visit www.felpower.com.