The acceleration in inflation world-wide has made the need for fusion energy even more urgent. By far the largest factor in present inflation is the more than doubling in the price of energy since before the pandemic. In January, 2020, oil was $60 a barrel—today it is $120 a barrel. The price of natural gas is up by a factor more than 2.6. The increase in prices at the gas station and in heating bills , while painful, tells only a small part of the story. Taking into account all costs of energy, (including oil, gas and coal) each increase in the price of oil by $20 a barrel costs $1 trillion a year. Almost all of these costs travel through the economy, elevating the prices of nearly all goods and are eventually paid by wage-earners, farmers, and small business people worldwide, who consume these goods. For comparison, total wage and small business income is around $32 trillion a year, so the $60 a barrel increase in oil has by itself contributed more than 9% to total inflation.
In the United States, inflation since the beginning of the pandemic has totaled 13%, so energy costs—including those filtered thought the rest of the economy—constitute nearly 70% of total inflation.
Why has the price of energy shot up? It’s not the war in Ukraine—the price run-up started long before February. It is simple—less is being produced. Worldwide, oil production is 6% less today than in January 2020. Don’t entirely blame OPEC-plus, although that Saudi-led coalition has cut production. Here in the US, production has dropped by a whopping 10%! With supplies artificially tightened by global production cutbacks, prices naturally shot up.
Figure 2. Reductions in the production of oil, deliberately aimed at higher prices, have occurred both worldwide (top graph) and in the US (bottom graph) Source: US Energy Information Agency.
As explained in LPPFusion’s video Pandemic, Economic Crises and the Energy Density Solution, the basis for these production cuts were laid back in March, 2020, when the price of oil collapsed as Covid-19 shutdowns spread. With the strong help of the US government, the Saudis and Russia patched up differences and organized a sharp reduction in production. Combined with support for the US oil industry, these sharp reductions were easy to maintain as consumption ramped back up to pre-pandemic levels. Reductions that would have been impossible to impose pre-pandemic emerged from the international effort to stave off the severe financial threat of low prices.
The only way to prevent these repeated episodes of energy price strangulation of the world economy, which funnel trillions of dollars from all of us into the pockets of a handful of oil, gas and financial corporations, is to break the fossil fuel monopoly. Fusion energy, especially Focus Fusion, can do this by providing safe, clean, unlimited energy that is far cheaper than oil and gas. Of course, we are still at least 4-5 years off from even demonstrating a working prototype generator, so fusion can’t yet help with the immediate crisis. But simply the existence of a cheap alternative will prevent future crises, long before fusion actually displaces oil and gas. Once it is clear this will happen, all the oil and gas producers will try to sell as much product as they can before it become next to worthless, eliminating the possibility of any future production cuts and resulting price gouging.
Of course, energy prices are not the only reason for the current inflation. Another huge reason is the trillions the US, European, Japanese and Chinese governments have given to financial institutions. While most of this largess went into the stock market bubble, now deflating without government support, a large share went to real estate speculation, with huge financial institutions bidding up the price of housing everywhere. Millions of US homebuyers have been outbid by speculators paying cash. Money that governments could have directed into actually building housing and ending the very real worldwide shortage of housing instead ended up driving up the prices of existing housing.
By vastly reducing the trillions paid for energy, fusion will free up money for greatly expanded infrastructure, including far more housing. Without housing shortages, speculation will not be possible, so this source of inflation could be combatted as well.