Fossilflation: how fossil fuels are driving today’s cost‑of‑living crisis

We are not just in a "cost-of-living crisis". Across Asia, Africa, Europe and the Americas, fossil-fuel price shocks are driving a new phase of inflation known as fossilflation, pushing up energy, food and housing costs while oil companies profit.

Aren't we all weary of reading about the Strait of Hormuz in the news? This tiny strip of waterway not only controls 20-25% of the world's oil and gas supply, it also has direct power over our everyday bills. Has it finally opened? Or did the deal between Iran and the US collapse again?

In this never-ending guessing game of oil, politics, and keeping up with the cronies of fossil fuels, the one real fallout is that economic costs for all of us, worldwide, have been feverishly climbing, with hardly any respite in sight.

Secretary of War Pete Hegseth and Chairman of the Joint Chiefs of Staff U.S. Air Force Gen. Dan Caine conduct a press briefing on Operation Epic Fury at the Pentagon, Washington, D.C., March 4, 2026. (DoW photo by U.S. Navy Petty Officer 1st Class Alexander Kubitza)

Things are more expensive, globally: the fossil fuel price shock

Triggered by the energy shocks of the Israeli-US war on Iran, prices of everyday goods, from electricity to transport and fuel, have risen massively this year. Households in fuel-importing East Asia and Southeast Asian countries are among the hardest hit. Across Africa, the burden has landed on communities with the least room to absorb it. And across Europe and North America too, families are struggling with higher electricity, food, transport and fuel bills.

In the Philippines, driver Toni Prado's take-home pay collapsed from 1,000 pesos to 200 pesos for the same three trips.

In South Sudan, where 96% of electricity comes from oil, the government is now rationing power, cutting neighborhoods off from late afternoon until early morning.

In India, families have begun quietly trading imported cooking gas for cheaper firewood and dried cow dung, undoing years of progress toward cleaner, safer kitchens.

From Manila to Juba, Delhi to Berlin, this fossil-fuel-driven price shock is following the same pattern: higher energy prices, squeezed wages and governments scrambling to respond.

A woman shopping in a supermarket in Hong Kong.

Data backs this up. In the US, prices are projected to rise around 3.2%, and in Europe, about 2.6%. In Asia the Asian Development Bank estimates prices rose by 5.2%. According to the International Monetary Fund global inflation has been at 4.7% worldwide this year - which is equivalent to two and a half weeks' worth of your yearly household budget vanishing into thin air.

One day Hormuz will reopen, but the relief for most of us will still be partial and temporary. That's because we are stuck in a fossil-fuel shock cycle. Russia's full-scale invasion of Ukraine has already triggered one of the biggest global energy price shocks since the 1970s, pushing up gas and electricity prices and driving higher food and transport costs across much of the world, and those impacts are still being felt today. It's essentially the same, predictable pattern playing out right now, just a few years on, only under the guise of a different geopolitical conflict. So it's all just a matter of time until the fossil fuel shock hits and prices climb again.

Calling this repetitive cycle a cost-of-living or an affordability crisis, as many have been doing, would be too simplistic, and frankly inaccurate. What we're really caught in is a fossil-fuel dependence crisis, actually known as: fossilflation.

If 2026 were a book about war and rising bills, the word 'fossilflation' would have to be on the title

Fossilflation is a portmanteau of "fossil fuels" and "inflation". It was coined by Isabel Schnabel, a member of the European Central Bank's Executive Board, in a 2022 speech on energy and inflation. Put simply: fossilflation is when the cost of everything rises because our economic systems are still built to run on fossil fuels.

They are an energy source whose supply and price remain volatile, controlled by a handful of producers, shipping lanes, and governments who can disrupt it on a whim. And it's a familiar problem because we know that oil shocks have hit roughly every decade since 1973: from the Arab oil embargo and the Iran-Iraq War, to the 1990 Gulf War, the 2008 financial crisis, the Arab Spring, and Russia's 2022 full-scale invasion of Ukraine - each one driving prices up and economies into turmoil.

Every time one of these shocks hits, it's ordinary households, not oil companies, that absorb the cost through higher bills. So we're basically all just waiting to see whose decision sends fossil fuel prices, and by extension the wider economy, into disarray next.

Greenpeace UK activists visit petrol stations in Clacton, the main town in Nigel Farage's Essex constituency, and decorate the pumps with stickers showing Trump claiming responsibility for the high pump prices, and Farage expressing his support.

What's in a name: fossilflation vs inflation and the cost-of-living crisis

Economics 101 tells us prices of everyday goods and services going up is called inflation. And yes, it's true, we're living in a world where everything costs more. Inflation is a useful word on its own, but a slippery one to use in the context we're living in today, because it describes the effect without naming a cause. You can blame inflation on your government, invisible "markets" or "the economy" and never once have to ask where the money from your rising bills went to, instead.

Fossilflation goes a step further and names the culprit: our economies' deep reliance on coal, oil and gas has put us in an economic crisis. Fossil fuels aren't just something we burn for energy, the system we live in makes them inextricably linked to our food, water, healthcare and insurance systems too.

Which is why oil and gas price hikes also cascade through the prices of other essential goods. Fossil gas is the main feedstock for ammonia, which makes up 70-90% of the cost of producing nitrogen fertilizer, so a gas price spike becomes a fertilizer price spike, which becomes a pricier harvest. Diesel prices do the same to every truck, ship and plane moving that harvest to a shelf, pushing transport costs, and then the price of everything they carry, up in step. Even insurance isn't immune: the climate disasters fossil fuels help drive have pushed US homeowners' premiums up 40% faster than inflation in recent years. When the bill for fuel goes up, you can be fairly certain you'll be writing a higher cheque for higher prices across the board, sooner or later.

That's the real distinction between the two words: inflation tells you prices rose. Fossilflation tells you why, and who to send the bill to.

April 2026: Greenpeace activists project the truth about the source of Shell's huge profits onto their global headquarters by the Thames in London as well as next to a Shell petrol station. The projections include the messages "They Profit We Pay", "War Profiteers", "At Least We are Making Billions", "War Profits HQ" and "Making a killing".

How fossilflation is writing out massive cheques to Big Oil

In just the first 50 days of the US-Israel war in West Asia and North Africa (the Middle East), over US$150 billion had been siphoned from ordinary households to oil and gas companies just through soaring energy prices.

Even if the Strait of Hormuz swiftly returns to normal operations right now, ordinary households will still be paying out the fallout of elevated oil and gas prices to the tune of $600 billion. And should it continue to be blocked, that hit to households, businesses and governments could be as high as $1 trillion.

While our bills climb mercilessly, Big Oil seems to be doing rather well for itself. Shell's first-quarter profits jumped 24% to $6.9 billion as the war pushed prices higher. TotalEnergies reported $5.5 billion for the same quarter. Across the industry, the world's largest oil and gas companies made an estimated $23 billion in excess profits in the first month of the war alone.

And that's before governments even open their own wallets. Governments worldwide are on course to spend $1.1 trillion propping up the fossil fuel industry in 2026 alone, prioritising short-term fossil fuel subsidies over a clean energy transition instead of helping people face fossilflation and reducing their economies' dependence on fossil fuels.

Then there's the cost of the extreme weather fossil fuels drive: the floods, droughts, hurricanes and cyclones, whose fallout lands several times over, in our bills, in our wellbeing, and in the recovery costs. Air pollution from burning coal, oil and gas is linked to roughly 8.7 million premature deaths a year worldwide, nearly one in five deaths on the planet. Europe's recent heatwaves added an estimated €700 million (or US$800 million) to electricity bills in France and Germany alone, on top of the 1,300 lives it took. The fossil fuel industry causes at least US$9.3 trillion per year in climate damages and air pollution deaths alone, and pays almost nothing for it. Add to that direct government subsidies and tax breaks, and the total transfer of public money,our money, to the fossil fuel industry reaches $12 trillion a year. That is equivalent to more than $1,400 from every person on Earth.

This is fossilflation in action. Our money isn't vanishing into thin air. It's landing in the wallets of oil executives. If our countries remain dependent on fossil fuels, we remain trapped in repeated cycles of fossilflation.

The way out of fossilflation

The fix to fossilflation has never really been complicated, just largely inconvenient for the people currently profiting from the problem. But the solution does exist, and it's up to our representatives to act swiftly.

Unlike past cycles of fossilflation, we now have a clear way out of fossil fuel dependency: renewables. Wind and solar power are no longer the plucky underdog, they've quietly become the cheapest form of energy in human history. Solar costs have fallen 87% since 2010, battery storage costs have dropped 93% in the same window. Further, in contrast to fossil fuels, renewables don't rely on being shipped and can be built and owned locally, so their prices remain low and stable once constructed. And quite importantly these days, renewable energy is less, much less likely to fuel conflicts. Governments must now ensure that we can switch to decentralised renewables in a fast, fair and just manner.

Greenpeace Philippines with the support from the local government units install solar panels to light up the residents of Inanuran Island, Bohol as part of the efforts to boost the community's capacity to respond to the climate crisis.

They must make polluters pay on their profits with stronger and more permanent taxes, so that this money can be redirected towards a just transition and supporting those facing the worst impacts of the climate crises.

And while all this happens, let's also name the crisis for what it really is. Not just an affordability or cost-of-living crisis. We are currently living through fossilflation, but that doesn't mean we have to ever again.

Mallika Singhal is a Senior Coordinator for Global Communications with 350.org.

Guest authors work with Greenpeace to share their personal experiences and perspectives and are responsible for their own content.

Frequently Asked Questions

1. What is fossilflation?

Fossilflation is when prices across the economy rise because our energy systems still depend on coal, oil and gas - fuels whose supply and price can be disrupted at any moment by producers, shipping routes, or geopolitical conflict. The term was coined by Isabel Schnabel of the European Central Bank in a 2022 speech on energy and inflation.

1. How is fossilflation different from a "cost-of-living crisis"?

"Cost-of-living crisis" describes rising prices without explaining why they're rising. Fossilflation names the specific cause: economies built around fossil fuels, which pass their volatility on to food, transport, insurance and energy bills every time there's a shock, such as a war or supply disruption.

1. Why does the Strait of Hormuz affect prices everywhere?

The Strait of Hormuz is a shipping chokepoint that controls roughly 20-25% of the world's oil and gas supply. When it's threatened or blocked, oil and gas prices spike globally, and those higher fuel costs ripple into electricity, fertilizer, transport and food prices worldwide.

1. How many times has fossilflation happened before?

This is the seventh fossil fuel-driven price shock in the last fifty years, following events like the 1973 Arab oil embargo, the Iran-Iraq War, the 1990 Gulf War, the 2008 financial crisis, the Arab Spring, and the 2022 Russian full-scale invasion of Ukraine.

1. Who profits when fossil fuel prices spike?

Oil and gas companies. In the first month of the Iran war alone, the world's largest oil and gas companies made an estimated $23 billion in excess profits, while Shell and ExxonMobil each posted billions in quarterly profits driven largely by the war-fuelled price rally.

1. How much is fossilflation costing households and governments?

In the first 50 days of the US-Israel war in the Middle East, over $150 billion moved from households to oil and gas companies through higher energy prices alone. Depending on how long the Strait of Hormuz disruption continues, the total hit to households, businesses and governments could reach $600 billion to $1 trillion. Separately, fossil fuels cost the world an estimated $12 trillion a year once climate damages, air pollution, and government subsidies are included.

1. What's the way out of fossilflation?

Reducing dependence on fossil fuels by shifting to decentralised renewable energy. Solar costs have fallen 87% since 2010 and battery storage costs have dropped 93% over the same period, and because renewables don't need to be shipped across volatile global routes, their prices stay stable once built. Pairing this transition with taxes on fossil fuel profits can help fund a fast, fair shift away from fossil fuel dependence. Together with renewables, governments must also implement other measures to reduce the demand and dependence on fossil fuels, such as making public transport free, food sovereignty and affordable housing.