Economic Fallout Of The Russo-Ukrainian War

Haider Ikram

Just as the second anniversary of the COVID-19 lockdown was lurking around the corner, the Russian Federation launched a well-anticipated invasion on the sovereign state of Ukraine, resulting in a bombardment of sanctions from various countries. The infamous war has not only impacted the way of life of those directly involved, but also countless other nations around the world. Many people have been impacted by the growing conflict, while others are not yet aware of the effects that have taken place. The economic consequences are arguably one of the most conspicuous changes on a global scale and they have taken form in a variety of ways.

The closest-to-home, and most well-known example, is the rapid boom in oil prices. With the outbreak of the pandemic, oil prices dropped to a record low due to the lack of transportation requirements; however, this was a temporary phenomenon. As regulations started to settle, the price of oil returned to a steady rise. As a result of the Russian assault, various countries imposed sanctions on Russia. Russia, being one of the largest oil exporters, made oil sanctions a difficult economic decision for other countries as it cut off a main source of a fundamental and crucial resource. Consequently, these countries were required to pay significantly more for oil from other nations. Russian oil is cheaper because they produce more and sell it for less due to their exceptional quantity of this natural resource (this has; however, affected Russia’s revenue generation as a country since one of their primary sources of revenue comes from oil and natural gas). The price of crude oil is currently more than $100 USD a barrel which is the highest of the past decade, compared to only approximately $37 USD a barrel during the peak of the pandemic, and around $75 USD before the pandemic. The current gasoline prices fluctuate within the range of $1.60 and $2 per liter, whereas the regular price at such a time should be around $1.30 per liter. With this in consideration, the war can be attributed as the main factor behind this sudden increase in price.

Before the conflict, Russia and Ukraine were also prominent exporters of wheat. Combined, they make up more than a quarter of the international supply. Although no direct sanctions have been imposed on Russia’s wheat supply, the conflict has played a role in disrupting the shipments of wheat from Ukraine through vital trading routes in the Black Sea. Due to the pandemic, the supply chain was already a major problem, but the lack of wheat transportation has caused the price to further increase. Moreover, farmers across the world are also indirectly affected by the war since a lot of their harvesting equipment requires the currently expensive oil which only makes production even more difficult.

As witnessed numerous times in the past, wars often cause a general surge in inflation. The Conference Board Of Canada’s (CBF) Pedro Autunes, estimates that there will be a 1.2 percent increase in Canadian inflation levels in 2022 and a 0.9 percent increase in 2023 compared to a reality which involved no war. This will generally increase the cost of all living and the CBF also predicts that the rising inflation will put pressure on the Bank of Canada to keep up with rates accordingly. It is also important to note that this inflation can be assumed to have a direct correlation to the increase in gas prices due to how valuable it is on an international level.

With the continuation of the dispute, the prices of commodities may continue to rise, but at the end of the day, all is unknown.

Works Cited

Autunes, Pedro. "Economic Impact on Canada of the War in Ukraine." The Conference Bank of Canada, 17 Mar. 2022, www.conferenceboard.ca/insights/featured/canadian-economics/economic-impact-on-canada-of-the-war-in-ukraine. Accessed 12 Apr. 2022.

"Crude Oil." Trading Economics, tradingeconomics.com/commodity/crude-oil. Accessed 12 Apr. 2022.

"Energy Fact Sheet: Why does Russian oil and gas matter?" IEA, International Energy Agency, 21 Mar. 2022, www.iea.org/articles/energy-fact-sheet-why-does-russian-oil-and-gas-matter. Accessed 12 Apr. 2022.

McInnes, William. "Why the price of oil matters so much to the world." Financial Review, 14 Mar. 2022, www.afr.com/markets/commodities/why-the-price-of-oil-matters-so-much-to-the-world-20220308-p5a2wk. Accessed 12 Apr. 2022.

Swanson, Ana. "Ukraine Invasion Threatens Global Wheat Supply." The New York Times, 24 Feb. 2022, www.nytimes.com/2022/02/24/business/ukraine-russia-wheat-prices.html. Accessed 13 Apr. 2022.

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