You have surely realized this: your shopping cart costs significantly more than a few months ago, and fears of a shortage of gas or electricity are increasingly felt. Inflation strongly affects France, but also the 19 countries of the euro zone. What is this due to? We will try to summarize it all for you.
1. The war in Ukraine
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The Russian-Ukrainian conflict has strong impacts in France, and more broadly, on the entire European economy. The price of raw materials has skyrocketed since the beginning of the clashes, the prices of gas or wheat have soared. Why ? Well because the two countries at war are major producers: Russia is the second largest exporter of oil and the first of gas in the world; Ukraine is a major producer of agricultural commodities. According to the Ministry of Agrarian Policy and Food, Ukraine was exporting 6 million tonnes of grain per month before the outbreak of tensions. In March, only 322,000 tonnes left the territory, 970,000 in April and around one million in May and June. Inevitably, when the quantities decrease but the demand remains the same: the prices explode. This explains the many increases in the shelves of our supermarkets, and the fears about the future of our gas and electricity bills.
2. Malfunctioning nuclear fuels power shortages
Even if oil and gas prices are soaring here, you should know that France remains less affected than many of its European neighbors. How ? Thanks to electricity from nuclear power. For example, imported oil and natural gas represent 45% of our needs, compared to 60% in Germany or 73% in Italy. But now, happiness never comes alone, more than half of French nuclear reactors are shut down (32 out of 56), for maintenance operations, following, in particular, corrosion problems! Thursday, September 1, Elisabeth Borne publicly summoned EDF to keep its maintenance schedule to put the reactors back into service as soon as possible, and not to have to restart a coal-fired power plant to fight against the electricity shortage this winter. REASSURING.
3. Climate change ruins many crops
Yes, of course! If the prices of olive oil, coffee or mustard are exploding, it is because of global warming. The reason is simple: this summer’s heat waves, droughts, floods and other freaking climatic phenomena have ruined many cultures, all over the world. Result: the harvests are less important (really much less), and the supply decreases significantly, while the demand remains the same. To cope with the shortage, producers, exporters and resellers are forced to inflate prices. Quite simply. Is it when we really pay attention to the planet, when we tax private jets so much and when we force ourselves to adopt lifestyles that are a little greener, seriously?
4. … There are also fewer and fewer breeders
According to this article in Le Monde, the number of milk producers (and therefore, dairy cow farmers) has decreased by more than 4% in 2021. Aging farmers, difficult conditions (such as drought which is decimating grass meadows whose the cattle feed themselves), lack of generational renewal… There are many reasons, but the result is the same: there is less and less supply, and prices are soaring. At the end of February, the price increase for dairy products reached 8% with distributors.
5. Avian Flu also responsible for soaring prices
On the poultry side, the avian flu epidemic is the main cause of the price increase. Since February, in Europe, some 15 million poultry have been slaughtered because of the disease. Inevitably, this increases the selling price, the producers trying as best they can to plug the financial gaps created by the reduction, or even the complete disappearance, of their farms.
6. The post-Covid economic recovery
Speaking of epidemics… In 2020 and 2021, confinements and various restrictions have greatly reduced consumption by the French. During this period, they were able to accumulate more savings than usual. Savings partly made possible by the help of central banks which created, ex-nihilo, money to buy government bonds. This is what allowed the State to borrow at a particularly low rate to pay for the salaries of the confined. Once the periods of confinement were behind us and the vaccination campaigns were over, demand quickly started to rise again. Travel, return to the terrace, purchase of real estate… The French have resumed the course of their lives and their expenses. Problem: The offer could not follow. The restarting of factories and businesses has been much slower, the time that raw materials begin to circulate normally from one continent to another. As always, when supply is less than demand, prices go up.
7. And the re-containment in China
While confinement is a distant memory in France, the Chinese are not so lucky. In March 2022, faced with an upsurge in cases, many regions of the country again found themselves under glass. An event that further accelerates the distortion between supply and demand, and which has strong repercussions on industrial production and global logistics, as the world’s second largest economy is put back on hold. When factories and ports idle for long weeks, production and transportation costs increase. Hey presto, a little oil on the fire in the cauldron of inflation. Owl !
To meet better compliance with environmental criteria, more and more companies are relocating their businesses to Asia to bring them back to Europe and the USA. We are clearly not here to judge this kind of movement, quite the contrary! Even if it is positive for the planet and for many ethical issues, it should be noted that relocating to these regions inevitably leads to an increase in production costs and inevitably, in selling prices.