Since Russia invaded Ukraine Thursday, Feb. 24, gas prices in the U.S. and around the world have skyrocketed. Both the invasion and efforts from the U.S. and North Atlantic Treaty Organization (NATO) to counteract it have deeply affected global financial markets.
Since the invasion, the average price of regular gas in the U.S. has increased by 17 percent through Wednesday, March 9, with further increases highly likely. But why exactly are prices increasing so much? The answer: Russia is a major exporter of crude oil on which gasoline prices are based. Subsequent Western economic sanctions placed on Russia have caused price increases, and the U.S. and Britain’s announcement on Tuesday, March 8 that they would ban Russian energy imports ensured that global prices won’t decrease in the near future.
But how high will prices get? Chief U.S. economist for Capital Economics Paul Ashworth predicts that the average price of retail gas in the U.S. will be $4.50 per gallon by next month. Current prices have already surpassed the previous records set in the summer of 2008 at the beginning of the Great Recession.
Gasoline prices are not the only necessity experiencing sharply rising prices. Last year, Russia and Ukraine represented over 30 percent of the global wheat trade, and wheat prices have risen by 27 percent since the invasion. The two countries also represent just under 30 percent of global barley exports and around 80 percent of the global supply of sunflower oil. Ukraine alone provided around 15 percent of corn exports. All of these commodities have experienced similar price increases due to shipping obstructions and sanctions.
Not only will the food price increases strain working class families, they could be a disaster for global food security, potentially causing severe malnutrition and even starvation.
The conflict between Russia and Ukraine had terrible timing when considering the global food supply. Prices were already rising this year due to droughts in North and South America and typhoons in Malaysia that decreased crops for soybeans, corn and palm oil.
Currently, a large portion of Ukraine’s exports are still in the country due to closed ports, but major tests will take place next month and this summer. Corn, barley and sunflower oil are typically planted in April, but these areas are experiencing major military conflict, and summer is when wheat is harvested. Even though Russia’s planting and harvesting are not experiencing the same disruptions, food supplies could still be impacted due to major shipping lines no longer doing business with Russia.
The countries that will be most affected in the short-term are those most reliant on imports from Russia and Ukraine. Numerous African countries including Egypt, Cameroon, Democratic Republic of Congo, Libya, Nigeria, South Sudan, Sudan and Yemen are especially at risk of food shortages. The conflict will also exacerbate already existing global food insecurity issues.
According to chief economist at the World Food Programme Arif Husain, even without Russia and Ukraine’s contributions, there is still technically enough food to feed everyone globally. The issue, therefore, lies with the price increase causing people to no longer afford food. Husain suggests that funding from governments and donors can fill the gap and keep food prices stable. However, even in peaceful times governments are not particularly generous regarding food aid, as shown by the World Food Programme struggling to meet even half of their $18 million goal from United Nations member states.
