Ukraine may be half a globe away but, if Russian President Vladimir Putin fulfills his threat of taking over the country, Americans might feel shock waves at gas pumps and grocery stores, experts predicted.
Experts said that food and gas prices could rise because Russia is the largest exporter of oil and wheat in the world.
Phil Lempert (a food marketing and consumer behaviour analyst) stated that the United States doesn’t import Russian wheat.
It also doesn’t import much from Ukraine. Ukraine is the breadbasket Europe, as it produces much of the wheat and rye that Europe relies on.
Experts also stated that China is a major importer of Ukrainian wheat.
Lempert warned that prices could rise if other countries decide to stop buying from them and instead import from the U.S.
According to Alan Holland, CEO of Keelvar and founder, Europe’s sourcing technology company Keelvar, war in Ukraine could disrupt supply chains throughout Europe, stated to CNBC.
He said, “Even though harvest season is still a few month away, a prolonged war would cause bread shortages this autumn.”
Even before Putin announced that he would send troops to the pro-Russian separatist Donetsk, and Luhansk areas in eastern Ukraine, wheat and corn prices had been rising.
Prices will likely skyrocket if violence escalates.
“Rising food costs would only be exacerbated by additional price shocks,” Per Hong, a senior partner in the consulting firm Kearney, said to CNBC.
The same applies to oil and gas prices
Frank Macchiarola from the American Petroleum Institute, a policy expert on policy, said that rising tensions in Eastern Europe have created additional uncertainty for an already tight market. Promoting policies that encourage U.S. production is the best way to provide reliable, affordable energy for Americans.
A blockade of Russia means that the rest of Europe, which gets 40 percent of its natural gas and 25% of Russia’s oil will be imported from this country. It will then need to source it elsewhere, driving up the costs.
Russia is the second largest exporterof crude oil to the U.S., after Canada. This is because of sanctions that have cut off Venezuela’s supply and the OPEC members in the Middle East have reduced shipments to maintain a high price.
“Russia is incredibly insignificant in the global economy, except for oil, gas,” Jason Furman from Harvard University, who was an advisor to then-President Barack Obama told The New York Times. It’s basically a large gas station.
Joe Brusuelas is chief economist at RSM, a consulting and tax services firm. He said that Russia is “primarily a huge gas station.”
He said that Russia is also a country rich in minerals. It provides 45.6 percent of the palladium needed to make microchips and large amounts of nickel as well as precious metals like silver and platinum.
Brusuelas stated that “So yes, the average American household will bear some of Putin’s invasion in Ukraine.” But the effect will be indirect for the time being.
