Global Energy Crisis: Inflation and Recession

Abstract

With the deepening process of world economic integration and financial globalization, the fluctuation of international crude oil prices will have a substantial impact on the world economy and financial market. This paper will study the relationship between the energy and the financial crises. The price of crude oil has a relatively significant impact on the market, especially during the outbreak of the COVID-19 pandemic and after this year's conflict between Russia and Ukraine. Taking crude oil as an example (the most basic energy), analyze the impact of the price of crude oil on the three financial markets of the United States, the United Kingdom and China through three transmission chains, namely the Producer Price Index, energy sub-item in Consumer Price Index and the Inflation Rate. The empirical research results show that the financial and the energy crises are inseparable. The energy crisis triggered the financial crisis, and the financial crisis buried the root of the energy crisis. By applying the sustainable development theory and implementing the corresponding new financial crisis countermeasures and energy policies, countries can effectively mitigate and prevent the crisis.