Economic Effects of rising Energy Prices

Abstract

Abstract Energy is an indispensable resource for everyday activities, both for the population and for economic operators. Being used for heating, cooling, and lighting buildings, driving, and putting into operation various machines, energy is essential for the entire economy. Since energy is a central element of human activity and energy prices are the quasi-permanent component in most costs, its price can be called "the most important price in the economy". The topic of the research is a highly relevant issue for both financial and energy sectors. The research aims to identify and analyse the economic effects of energy price increases. Among the proposed objectives are: to gain in-depth knowledge of the scientific background of the subject under investigation; to determine the role of energy in a country's economy; and to determine the economic and social consequences of energy crises. Using the qualitative research method, this article is the result of an integrative consultation of a large, rich, and recent scientific literature. To achieve the established objectives, official documents of the European Commission and the United Nations, reports of the International Monetary Fund, the European Central Bank, and the National Bank of Romania, academic articles and studies elaborated by various prestigious think tanks were studied. The first part of the paper briefly outlines the importance of energy for a country's economy. The second part reviews the scientific literature, thus illustrating the distinct opinions of various experts in the field. The third part presents the economic effects of energy crises and analyses the impact of rising energy prices on inflation and economic activity from a theoretical perspective.