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Thursday March 28th

Russian invasion of Ukraine threatens already-rattled supply chain

<p>Following Russia’s invasion, the price for a barrel of oil rose above $100 for the first time since 2014, with the price of natural gas increasing by a third(Image created by Lauren Schweighardt).</p>

Following Russia’s invasion, the price for a barrel of oil rose above $100 for the first time since 2014, with the price of natural gas increasing by a third(Image created by Lauren Schweighardt).

By Matthew Kaufman

Staff Writer

Russia’s invasion of Ukraine could add another bottleneck to a global supply chain that is still struggling to meet demand as a result of rising inflation and the ongoing pandemic. Gas prices are expected to climb, and the stock market is experiencing severe volatility.

Russia is the largest exporter of natural gas in the world and one of the top exporters of oil, and according to the Wall Street Journal, shipping companies have stopped transporting Russian barrels out of fear of economic sanctions imposed by the U.S. and the European Union. 

Following Russia’s invasion, the price for a barrel of oil rose above $100 for the first time since 2014, with the price of natural gas increasing by a third. 

In a speech on Feb. 24, President Biden addressed concerns that the price of gasoline would skyrocket, saying that his goal is to minimize price increases.

“I know this is hard and that Americans are already hurting,” he said. “I will do everything in my power to limit the pain the American people are feeling at the gas pump. This is critical to me.”

But Biden also defended economic sanctions against Russia as necessary, saying “This aggression cannot go unanswered. If it did, the consequences for America would be much worse. America stands up to bullies. We stand up for freedom. This is who we are.”

According to CBS News, gas analysts are warning that the average price of gas in the U.S. could reach $4 per gallon by April.

Andrew Gross, a public relations manager at AAA, told CBS that Americans should not panic regarding price increases, noting that people “are not going to wake up tomorrow and not be able to afford gas. There's plenty of gasoline, there's plenty of oil. If this war is resolved quickly, you will see prices come back down.”

The sanctions have already taken a toll on Russia’s economy. According to Bloomberg, the value of the ruble, Russia’s currency, hit a record low, and Russian stocks ended trading on Feb. 24 down 33%, equivalent to a $200 billion loss in value.

And, as reported by the New York Times, the war also threatens the world’s wheat supply, as nearly 25% of the world’s wheat comes from Russia and Ukraine. Though there are no sanctions placed directly on wheat, sanctions on Russia’s financial system could make it harder for food traders to transport Russian wheat, according to the WSJ.

David Laborde, senior research fellow at the International Food Policy Research Institute, told the Times that the conflict would “likely have an immediate impact on the global wheat market stability.”

As the situation in Ukraine worsened, the U.S. stock market was in constant flux, with stocks tanking on Feb. 24 following the invasion and then rebounding following statements from Russia that it was willing to negotiate.

But the constant volatility is making investors nervous, according to MarketWatch.

“We’re calling the state of the markets today fragile,” Greg Bassuk, CEO of AXS Investments, told the outlet.

With so much economic turmoil, experts were looking toward Biden’s State of the Union on March 1, as the address would be crucial in reassuring both investors and average Americans that there is a plan to make it through the chaos.

As reported by the WSJ, Biden announced in his address that the U.S. would partner with other nations to release 60 million barrels of oil from emergency stockpiles to counter price increases as a result of the conflict.

Regarding inflation, the president said that the solution is to boost domestic manufacturing of cars and computer chips, decreasing dependence on overseas supply chains.

As economists grapple with the idea that the war between Russia and Ukraine may go on for a while, it will be up to Biden to assure the public that the economic impact will be manageable.

“Consumers need greater confidence to go back to work, start spending again,” said Bassuk. “Investors need the likelihood that there will be more stability in the market and a light at the end of the table from this roller coaster.”




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