Margaret Minnicks has been an online writer for many years. She writes articles that are interesting to her readers.
Russia’s invasion of Ukraine is being described as the most serious crisis in Europe since World War II. Don't be mistaken to think that because we live in the United States, Russia's invasion of Ukraine won't affect us. Usually, when there is a conflict halfway around the world, it affects us mainly when the prices of our basic essentials go sky high.
Russia’s attack on Ukraine affects the global economy. Even though we live far away from both places, there are at least five things that will cost us more. Economist William Hauk says the sanctions the international community is placing on Russia are likely to cause prices to spike around the world. The longer the war continues, the higher prices are bound to go up.
Russia is one of the world’s biggest energy exporters of oil and natural gas. That nation produces an average of 10 million barrels of oil a day, which is about 12 percent of the global demand. Russia is Europe’s largest supplier of natural gas, which is about 17 percent used to fuel power plants and provide heat to houses and other buildings. Crude oil prices increased to $105 a barrel as soon as the Russian military entered Ukraine, and it could go even higher.
Gas was already high in the United States. Don't be surprised to see gas prices go even higher in the coming weeks because a change in prices in one part of the world affects prices of energy in other places.
AAA says the average price of gas on Thursday, February 24, 2022, already cost $3.54 a gallon. That was up from $2.66 at the same time one year ago. USA Today reports that drivers might have to pay around $4 a gallon for gas here in the United States.
2. Metals, Raw Materials and Medicines
Ukraine had become a major supplier of metals, raw materials, and medicines in recent years. Because of the upcoming war, Ukraine’s currency began to decline in value. That means the cost of Ukraine's exports will increase in price.
The United States chip industry depends on neon gas from Ukraine as well as many elements needed for the manufacture of automobiles, jet engines, and semiconductors. Besides, a lot of medicines come from Russia.
3. Credit Card Debt
The Federal Reserve had already announced that it will raise the federal funds rate several times in the upcoming months beginning in March 2022. It could happen sooner with more rate hikes since Russia's invasion. That is really bad news for people with credit card debt. Try to pay off your credit card debt or at least get it down to a comfortable balance.
If American consumers cut back on spending, the Federal Reserve will quickly increase borrowing costs.
4. Wheat, Barley, Rye, and Vegetable Oil
Russia and Ukraine are two of the world’s top exporters of wheat that the United States depends on. Both countries together are responsible for approximately 30 percent of global wheat exports.
Fortune reports that the Russian invasion very well could impact the 59 million metric tons of wheat the two nations export yearly. Ukraine is also a major producer of barley, rye, and vegetable oil.
Ukraine also produces 16 percent of the world’s corn. Since that country supplies corn to America, the conflict could cause the price of corn to increase, but even more so in some other places, including the Middle East, Africa, and China. It was just last year when Ukraine replaced the United States as China's top corn supplier.
Those Five Things
Don't for a moment think the five things listed in this article are the only things that will be affected by Russia's invasion of Ukraine. The event will affect Americans' daily living, but the things are not limited to the major things listed above. The cost of heating houses and buildings will go up more than it already is. The stock market will also be affected.
Just how bad the economy will be depends on several things:
- how far Putin will go
- the severity of the sanctions placed on Russia
- how long the crisis will lasts
- if Putin cuts off oil or gas to Europe
- if the invasion will stop Ukraine from exporting food and necessary products to the rest of the world
On February 22, 2022, just one day before the Russian invasion, President Joe Biden warned Americans that a Russian invasion of Ukraine would certainly come with a big price tag. Even though the situation looks bleak at the moment, President Biden's administration has stated that it is taking necessary steps to soften the impact.
Even though the conflict is far away, it will have a significant impact on people all over the world. So, yes, the invasion will affect America's finances. However, it is indeed true that it will adversely affect Ukrainians the most. They will pay the most in terms of lives lost, economic costs, and the possibility of losing their government.