Here's How Sanctions on Russia Will Cost You More

This is true even for American consumers, although relatively few Russian exports reach US shores.

For example, Russian oil and gas account for less than 4% of the fuel consumed by Americans. But the average price of regular gasoline has risen 8 cents a gallon, to $3.61, since the day before invaded ukraine, wholesale prices rose even more. This means that within two weeks, gas is expected to reach an average $4 a gallon nationwide in the US for the first time since 2008. It could soon surpass the record $4.11 per gallon average set that year.

“It’s a global market,” said Tom Cluza, global head of energy analysis for the Oil Price Information Service, which tracks gas data for AAA. We have to compete more for the unpolluted Russian oil that is available.”

Despite the sanctions, the purchase of Russian oil and natural gas is still legal. But many of them will not be sold. many merchants Not willing to buy Because of the difficulty of completing transactions with Russian banks that are subject to sanctions.

Oil prices rose another 3% on Monday in response to Russia’s Swift useThe basic plumbing of global finance that allows banks to send the secure connections required to move money.

“Putting some Russian banks out of the Swift system could disrupt oil supplies as buyers and sellers try to figure out how to deal with the new rules,” Andrew Lebow, an industry consultant, said in a note to clients on Sunday. “The bottom line: no financing, no oil.”

Another concern for traders: how to safely transport tankers to Russian ports to pick up oil.

“No tankers means no oil,” Kloza said.

Connecting

Diesel hit $4 a gallon for the first time in nearly eight years over the weekend. Although few Americans drive diesel cars, most large trucks use them. Almost all goods sold in the United States are transported by truck at some point.

The trucking industry itself has faced challenges for years, mostly due to a Drivers shortage. The higher fuel costs will be conveyed by the trucking companies in the form of fuel surcharges. So all companies will have to pay higher transportation costs. With inflation already high, they are more likely to pass these costs on to consumers.

“Inflation expectations in homes and businesses have reached very high levels, and could rise further if the Russian invasion of Ukraine causes energy prices to rise or disrupts supply chains,” Goldman Sachs wrote in a note Monday. High and persistent inflation than previously expected.

goods

Although the Russian economy is centered around its energy exports, they are not the only Russian products used by the West. The United States bought about $25 billion in goods from Russia last year, not including $4.8 billion in crude oil. That might sound like a lot, but non-oil purchases amount to just over half of what American customers bought from tiny Thailand last year.

Commodities such as wheat and timber are major Russian exports, and these prices have increased in global commodity markets as well. Russia is also a major exporter of important metals such as aluminum, palladium, nickel, and titanium. Palladium is used in cars, cell phones, and even dental fillings. Nickel is used to make steel and electric car batteries. Titanium is important to aerospace products, including commercial aircraft.

A note on Monday from Karsten Brzeski, global head of macroeconomics, said uncertainty over the supply of these products, and higher prices in commodity markets, could create “further disruption to global supply chains already reeling from the pandemic and semiconductor shortages.” . For ING Research. It can also drive up prices as the shortage of computer chips is a major factor in driving new and used car prices to record levels.

“Globally, higher commodity prices will exacerbate already existing inflationary pressures,” Brzeski said.

Fed

However, the war could also cause the US Federal Reserve and other central banks to actually roll back their efforts to rein in inflation by raising interest rates. Uncertainty about the general economic impact may make regulators more cautious.

Federal Reserve Governor Christopher Waller said in a Speech Last Thursday that based on recent economic data, “a strong case can be made” for a half percentage point rise in March, which would be the first time since 2000. The Federal Reserve raised interest rates this much in one meeting. But then he warned, “Of course, it is possible that the state of the world will be different in the wake of the Ukraine attack, and that could mean that a more modest tightening is appropriate.” Waller added that the right decision is now uncertain.