Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit

onfinance.org. For those living in the United States, there's recently been some good

inflation news as falling energy prices reduced inflation for the month

of July. Europe is not nearly as lucky where all European countries, except for France and

Switzerland, are expected to have higher inflation in 2022 than the United States based on recent

OECD estimates.

Germany's central bank chief warned that the recent surge in energy prices was likely to drive

German inflation above 10% this autumn and keep it elevated next year.

Prices charged by German industrial producers rose 37.2% in the year to July, the highest

increase in recent history.

City Group announced earlier this week that they expect the UK inflation rate to hit 18%

next January, making the current US inflation rate of 8.5% look quite mild.

One of the biggest reasons for the difference in inflation rates is energy costs, and in particular

the cost of natural gas. The Front Month benchmark European Natural Gas contract hit $291.90 per megawatt hour earlier this week.

That would be around $490 a barrel on an oil equivalent basis, quite expensive.

The cost of natural gas in the United States has risen too, but to a much lower

absolute price. That's because the US became a major energy producer in recent decades,

while Europe reduced their production of fossil fuels and relied on Russia as a major supplier of oil and gas.

Those imported supplies have declined since the Russian invasion of Ukraine.

The UK energy regulator Ofgem is expected to announce this Friday an increase in the energy

price cap to more than £3,500 for an average household's energy

needs.

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