By: Virginia Riddle
Across the world, the Russia-Ukraine conflict is expected to impact trade and economic prosperity. From American gas prices to oil businesses in India, the invasion is projected to have a lasting impact on international well-being.
In Michigan alone there is projected to increase in gas and fertilizer prices, to say the least. Russia is a major producer in both U.S imported crude oil (providing 8% of the U.S imports in 2021) as well as the world’s leading producer of potash (a necessary nutrient for crops grown for commodity markets) after Canada. The power that Russia holds over these markets could result in raised gas prices of up to $5 a gallon, and price gouging from fertilizer companies, an issue that Agriculture Secretary Tom Vilsack named as one of the department’s biggest concerns. To put in perspective the rapid progression of the gas situation, GasBuddy’s Patrick Dehaan said, “Over the course of the weekend, it would not be surprising that motorists could step outside, see the gas station, and prices could go up 20, 30, even 40 cents a gallon in some of these areas.”
Crude oil trade will affect a larger audience than a single American state, though. In countries like India, crude prices are also expected to cause a substantial amount of inflation.
“Our baseline forecast for WPI is 11.5-12 per-cent for FY22 and 6 per-cent in FY23, which might increase by around ~0.9-1 per-cent because of an increase in crude prices,” says a report by the Bank of Baroda chief economist Madan Sabnavis.
On an even bigger scale, if Ukrainian exports start failing due to the attack from Russia, many countries will suffer the loss of goods. Namely, China received $7.1bn worth of goods from Ukraine, making up about 14.5% of Ukraine’s total exports. While China does have a reportedly good relationship with Russia, that does not change the fact that it heavily relies on imports from Ukraine.
Apart from this, the assault on Ukraine is expected to exacerbate issues that already arose in the international economy from COVID-19. Supply chain problems continue against the hopes of countless individuals and will only be made worse by the Russia-Ukraine conflict tampering with the delicate international balance.
As Laura Rabinowitz, a trade lawyer at Greenberg Traurig mentioned in an interview with the Times, “There’s still tremendous port congestion in the United States. Freight costs are very high. Factory closures in Asia are still an issue.”
It is hard to say if these predictions will play out exactly as expected, but the general message is negative and imminent: Russia’s attack on Ukraine will cause some level of economic fallout for a cavalcade of nations across the world.