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Illustration: Annelise Capossela/Axios

An energy crisis around the world is hitting households and manufacturers that were already struggling to recover from the global pandemic.

Why it matters: This is a perfect storm of crises. It features supply shortages, especially from China; inflation; slowing growth; labor shortages; Russia’s continued geopolitical muscle-flexing and, of course, the fear that the world will burn to a crisp.

Driving the news: A combination of weather-related issues (many of which are related to climate change), unexpected demand and planned outages has sent natural gas and coal prices through the roof.

  • China's energy shortage has already caused high-tech manufacturing centers to close their doors.
  • India is in even worse shape, with much less ability to bring new power sources online.
  • In the U.K., the surge in natural gas prices saw many companies go bust, while the EU has been reminded of how uncomfortably reliant it is on Vladimir Putin's Russia for its energy needs.

The big picture: Inflation is bad, but energy-price inflation is terrible. It hurts the poorest the most and scares up memories of 1970s-style stagflation, where rising prices are combined with anemic growth.

  • The global energy transition to renewables is well under way, but hasn't come soon enough.
  • "Pressures on the energy system are not going to relent in the coming decades," writes the International Energy Agency in its latest World Energy Outlook, released on Wednesday.

By the numbers: Around the world, the demand for coal is far outstripping supply. The price of coal on the Nymex exchange in New York reached $274 per tonne on Oct. 5. A year ago, it was $57.

  • European natural gas prices rose by roughly 500% between early May and early October before easing slightly.

What's next: The U.N. Climate Summit in Glasgow begins on Oct. 31.

  • This crisis is likely to make China and India more reluctant to commit to phasing out coal-fired power plants in the near-term. The current crisis demonstrates that they need all the energy they can get, whatever the source.

The bottom line: The world is reliant on fossil fuels for much-needed growth. The problems with that aren’t just intergenerational. They’re right here, right now.

Go deeper

Retail sales slipped a surprising 1.9% in December

Shoppers in San Francisco on Dec. 22. Photo: David Paul Morris/Bloomberg via Getty Images

Retail sales fell 1.9% in December compared to the previous month, suggesting that shoppers bought holiday gifts earlier last year as they faced rising inflation and supply chain issues.

Driving the news: The data is much lower than the 0% change predicted by economists, according to FactSet.

The front-runners for Biden's Supreme Court pick

Judge Kentaji Brown Jackson (left) and Justice Leondra Kruger (right) Tom Williams-Pool/Getty Images and Lonnie Tague, US Department of Justice

Two highly accomplished Black female judges — Ketanji Brown Jackson, a judge on the D.C. Circuit Court of Appeals; and Leondra Kruger, a justice on the California Supreme Court — are seen as the early front-runners to replace retiring Supreme Court Justice Stephen Breyer.

The big picture: Jackson is a powerful federal judge with a record that progressives feel they can trust. Kruger was a highly regarded litigator and has carved out a reputation for working well with conservative judges.

Fed: Rate hikes "will soon be appropriate"

The Federal Reserve's headquarters building. Photo: Anna Moneymaker/Getty Images

Federal Reserve officials expect "it will soon be appropriate" to raise the central bank's main target interest rate, setting the stage for a rate hike at its next meeting in mid-March.

Driving the news: In a statement following a two-day meeting published Wednesday afternoon, however, the policy-setting Federal Open Market Committee teed up its next move without taking new action.