Russia is a major supplier of oil, natural gas and metals. Both Russia and Ukraine export agricultural commodities.
The Russia-Ukraine war obviously has many damaging effects around the globe. And one of them is inflation. Russia — and to a lesser extent Ukraine — is a major exporter of commodities, especially to Europe.
Russia supplies about 10% of the world’s crude oil. The war’s impact already has sent crude prices soaring
The U.S. crude price hit a 13-year high Monday. It breached $130 a barrel, before sliding back to $120.04 in recent trading, still up 4% from Friday. If Russia’s exports are eliminated, crude prices could hit $200 this year, according to bank analysts, Reuters reports.
Oil’s surge has pushed gasoline prices higher too. U.S. gas prices average $4.07 Monday, up 11% from $3.61 just a week ago, according to Triple-A (American Automobile Association). The latest figure is just 5 cents below the record high.
Natural Gas, Metals, Agriculture
Russia supplies 40% of Europe’s natural gas, and European natural gas prices hit a record peak last week.
Russia also is an important provider of metals, such as aluminum, titanium palladium, copper and nickel. Aluminum is used in drink cans and construction, among other uses. Stainless steel contains nickel, as do lithium-ion batteries. Nickel prices touched a 14-year high last week.
As for palladium, it’s used in catalytic converters for autos, and titanium is deployed heavily in the aerospace industry.
Russia and Ukraine also are major players when it comes to agricultural commodities. Together, they export more than 25% of the world’s wheat, and Ukraine provides 13% of the world’s corn supply. Wheat prices soared more than 40% to a 14-year high last week. Remember that rising agricultural prices affect meat prices too, as the animals are fed grain.
Supply Chain Woes
The war also has helped snarl the supply chain further, as transportation is now disrupted in the Russia-Ukraine area. Many shipping companies aren’t accepting Russian cargo.
“The conflict in Ukraine imposes further economic stress on a system stretched by Covid,” said Jagjit Chadha, director of the U.K.’s National Institute for Economic Research, according to Bloomberg. “Supply chains will be further fractured, and monetary and fiscal policies put under a severe examination.”
Given all these inflationary factors, it’s no wonder that J.P. Morgan economists see the war adding one percentage point to their U.S. consumer-price-index forecast for the fourth quarter this year, according to Axios. Consumer prices soared 7.5% in the 12 months through January, an almost 40-year high.
