As the long-simmering tensions between Russia and Ukraine transformed into a full-fledged war, all eyes are now on the ramifications of this conflict, which will closely impact the entire world.
These developments that directly affect the pricing mechanism of almost all products, especially energy and food commodities, began to threaten the global economy the very first day the war broke out.
WHAT’S THE LATEST ON ENERGY PRICES?
A few days before the invasion was launched, the rhetoric used by Putin at a press conference had already sent oil prices soaring. Then, with Russia's first attack on Ukraine, the jump in oil prices accelerated even further. The current levels of oil prices, not to mention the inflation they will trigger in the upcoming period, will further increase the already elevated global inflation. Moreover, the risk of Russian sanctions creating a serious supply problem has also resulted in "panic pricing." The threshold of $125 per barrel, which was the year-end prediction prior to the war, is already in the rear-view mirror now.
VENEZUELA AND IRAN MAY COME INTO PLAY
While the rapid increase in oil prices has the whole world on tenterhooks, an interesting move came from the U.S. Washington is pondering easing sanctions imposed on Venezuela's oil exports to close the crude oil deficit after prices settled on 4% higher on Tuesday as the U.S. banned Russian fuel imports. And according to a report by Reuters, the same goes for Iranian oil.
EU'S NATURAL GAS DEPENDENCE ON RUSSIA
At the time of writing this column, natural gas contracts with an April maturity in Europe had jumped to 345 euros per megawatt-hour and then stabilized at around 227 euros. This is an all-time record.
However, it seems that the price hikes will not be confined to this. The fact that the West, especially the U.S., has decided to sanction Russian natural gas, has also resulted in the same "panic pricing" we’ve seen in oil. The fact that the European Union is highly dependent on Russia for natural gas has also played a big role in this.
WILL THERE BE A FOOD SECURITY PROBLEM?
Another area affected by the Russia-Ukraine war is food prices. The war between two big grain producers is bound to cause crises with global supply. Price increases in food products such as wheat and sunflower oil are on the global agenda. Thus the question, "Will the world experience a food security problem?" springs to mind.
The Food and Agriculture Organization of the United Nations defines the concept of “food security” as the physical and economic access of all people to sufficient, healthy, safe, and nutritious food at all times to meet their nutritional needs and food preferences necessary for an active and healthy life. Looking at this definition, if we were to consider the latest developments, the prolongation of the war may indeed bring about a food security problem.
WHO WILL BE THE BIGGEST LOSER?
There’s a saying that goes: “There is no winner in war, and no loser in peace.” This applies closely to the Russia-Ukraine war. This conflict is still ongoing and negatively impacting the entire world.
Of course, at a time when civilians are dying, I will not be giving more weight to the economic crises that may arise. Yet, due to the negative economic repercussions of the war, innocent people living in countries that are not a party to the conflict are also negatively impacted. In a nutshell, time will tell who will emerge victorious in this war, but we already know that humanity, as a whole, has already lost.