Rising coal, natural gas prices to fuel inflation across the globe and hasten transition to renewable energy, CME says

Inflation in the US, which has been above 5 per cent for four straight months, could soon become a global phenomenon, CME economist Erik Norland says

Surging energy costs will have a cascading effect on electricity prices and consequently manufacturing costs in Asia

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Trucks loaded with coal are seen at the Jharia coalfield in India’s Jharkhand state. Coal accounted for 70 per cent of India’s electricity generation in 2020. Photo: AFP

Published: 7:30am, 21 Oct 2021Updated: 7:50am, 21 Oct 2021

CME Group, the world’s largest futures exchange operator, said rising coal and natural gas prices are expected to have a profound impact on consumers, as higher energy bills and manufacturing costs push inflation rates higher globally.

The elevated prices of coal and gas will also hasten the shift towards renewable energy.

Supply chain bottlenecks and rising energy costs have kept the US headline inflation rate at more than 5 per cent for four straight months, but it could soon be a global phenomenon, according to Erik Norland, executive director and senior economist at CME Group.

“The risk over the next few months is that the inflation that we’ve seen rising in the United States might begin to rise in other countries,” said Norland during a media briefing on Tuesday.

“We’ve seen a tremendous rise in the price of coal, and we’ve also seen a tremendous rise in the price of natural gas, so the risk is that it begins to push electricity prices a great deal higher around Asia, [where] it could also really impact manufacturing.”

Erik Norland, executive director and senior economist at CME Group, pictured in December 2018. Photo: Xiaomei Chen

Thermal coal futures traded on the Zhengzhou Commodity Exchange rose 8 per cent to 1,692 yuan (US$264.7) a tonne last Friday, the biggest weekly rise on record since they began trading in 2013 and have nearly tripled in price since the beginning of this year. Prices of imported liquefied natural gas have also almost doubled year to date.