WXMI — The escalating conflict in Ukraine could cause prices of food, oil, and some raw materials to rise in the United States, and quickly.
Most notably, drivers could see fuel costs climb by 7 p.m. tonight as gas stations raise prices to keep up with a lessened supply coming out of Russia – a country that controls around 10% of the world’s oil supply.
“Certainly we will feel that most acutely with oil, that will happen the quickest, it will happen pretty fast,” said Paul Isely, a professor of economics at GVSU’s Seidman College of Business. “We certainly are expecting that if we go two weeks out, we start to see things like $4 gasoline.”
Other experts, like Patrick DeHaan, an analyst with Gas Buddy, agree.
“Later tonight you may start seeing some gas stations go up 5-or-10 cents,” he said. “We’ve already seen the state of Michigan, which exhibits price cycling…we’ve already seen the prices in Michigan jump up to $3.49.”
DeHaan says the unexpected escalation overseas will throw a wrench into their predictions.
“The concern is that potentially Russia could retaliate by limiting oil exports,” he added.
You may also notice impacts at your local grocery store. Russia and Ukraine combined account for roughly a quarter of the world’s wheat output, so food items with wheat and barley will almost certainly cost more as less and less supply circulates worldwide.
“We’ll see it in food prices, but that won’t happen immediately,” said Isely. “It’s not a big time of the year for these types of exports, so it’s effects will be muted at this point.”
Isely predicts the tension in Ukraine will increase the U.S. inflation rate – already suffering it’s sharpest increase in 40 years – another 2%.
It could also serve to slow down the U.S. economy and spending overall.
“This type of instability running around in the world affects U.S. consumers and makes them less confident and so they start spending less money,” said Isely.
On Thursday, the Biden administration rolled out sanctions on Russian companies and financial institutions. It could be an effective way to hobble the nation’s economy and force a change in the conflict.
“If companies can’t trade in Russia, if they can’t get the goods and intermediate goods they need to produce things, if they lose people that they’re selling goods to, then it starts to affect people across Russia and starts to put political pressure on…is it really worth doing this?” said Isely.