With the Russia-Ukraine standoff escalating into an armed conflict, Americans should expect higher prices on certain commodities. This is a direct effect of what’s happening on the other side of the world.
And with current inflation rates, households should prepare a get hit on their wallets.
Higher Prices For Gas, Food, and Metals
Economists are scrambling to assess the impact of the Russia-Ukraine conflict on American households. This early, many are confident that the current situation is not enough to push the global economy into a recession.
However, crippling economic sanctions and supply disruptions will often upend the market.
Ben May, director of global macro research at Oxford Economics, warns the public to expect higher prices of commodities as a result of the ongoing conflict.
“Inflation is likely to peak at higher levels that we were envisaging just a few days ago,” he said. In particular, Americans should expect increases in the prices of fuel, food, and metals.
Fuel Prices Are Already High, And They Will Go Higher
Last Thursday, the price of oil hit an eight-year high of $105 per barrel. This will translate directly into higher gas prices for American motorists. Right now, the average price for a gallon of gas is $3.54.
However, Russia is the world’s largest supplier of natural gas and the second-largest producer of oil. Once other countries stop buying from Moscow, supplies will further tighten and cause prices to skyrocket.
Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) remains hesitant to increase production given they’re enjoying high prices right now.
Higher energy costs will raise expenses for companies that consume fuel. An increase in jet fuel prices means higher prices for airline tickets.
Manufacturers will also need to pay higher prices for the same amount of oil for their boilers. In addition, truckers and delivery services might adjust fares as gas prices spike.
Food Prices Might Go Up Soon
Right now, global food prices are nearing a 10-year high. The Russia-Ukraine conflict will make matters much worse. Russia is also the world’s top exporter of wheat, while Ukraine is also a major producer of wheat and corn.
In fact, Russia and Ukraine account for 25% of the world’s supply of wheat. Meanwhile, Ukraine alone holds 13% of the world’s corn supplies. Both countries also export vegetable oils.
Already, the effects are felt throughout the markets. Wheat prices registered their highest prices in ten years last Thursday. Corn and soybean prices also jumped.
Countries such as Egypt and Turkey consume a lot of Russian wheat. Since they won’t be buying from Moscow for the next few weeks, supplies will tighten and prices will go up some more. Even if they wanted to, sanctions will prevent them from dealing with Russian exporters.
May expects the artificial shortage to drive prices up. Major buyers such as China will now turn to Europe and the United States to fill the gap. Hopefully, Europeans will feel the sting of higher prices more than Americans.
Price of Metals Used In Many Consumer Goods Will Go Up
Russia is also a major exporter of many metals such as palladium, silver, aluminum, nickel, and copper.
Economists are now trying to figure out if economic sanctions against Russia will also affect the trading in metals. “Russia is a major producer of metals including aluminum and nickel and is also a substantial copper producer,” said analysts at S&P Global Platts.
The ongoing conflict, exacerbated by sanctions, can further tighten an already tight market. On Thursday, aluminum prices already surged to record highs in London.
In addition, rising electricity costs (due to high oil prices) are limiting production in many European manufacturers.
Lower supplies will get even lower once the West decides to sanction Rusal, Russia’s largest aluminum producer.
Combined with high energy prices, expect a rise in the prices of goods that use aluminum. These include electronics, vehicles, and food packaging materials.
Watch the TODAY video reporting on how the Russian attack on Ukraine could affect gas prices, stocks:
How can the United States solve the problem of the rising prices of many goods? Will help bring the Russia-Ukraine war to a quicker end solve the problem?
Let us know what you think. Share your comments below.