In the last few weeks, all the eyes are pointed to the Russia-Ukraine tension at the border as Russia threatens to attack Ukraine for some time now.
While the safety from a possible war is a real concern that might affect the whole world, if the current situation continues for a longer period of time or by any case escalates, it might drive the cost of living to the sky.
According to financial experts, a potential conflict between Russia and Ukraine might disrupt the whole energy world market increasing oil and gas prices that will directly affect our country and even further increasing the cost of living for the majority of the Americans.
“Unfortunately, if Vladimir Putin invades Ukraine, it’s the American household that’s going to partially bear the burden of adjustment,” explained RSM Chief Economist Joe Brusuelas.
Brusuelas continued that a potential conflict will raise the prices to everything that is connected with gas and oil.
The data shows that Russia is the second largest producer of oil in the world and potential conflict will surely affect the world’s oil supply which is already low and struggling to keep up with the current demand.
Potential escalation at the border will further increase gas and oil prices, while potential sanctions to Russia and cutting down the oil distribution will further sky-rocket the prices.
Even president Joe Biden and the White House administration are aware of the consequences of such scenario. In a recent speech, the said “I will not pretend this will be painless” directly referring to the global energy disruptions in case of war and sanctions.
Energy prices are a huge factor in this red-hot inflation hitting your budget.
“How does this really impact me? It’s in the cost of everyday living, basically the things we don’t think about like heating our homes, like turning on the television, turning on your computer,” Brusuelas said.
Natural gas and oil prices are one of the largest factors currently affecting the highest inflation Americans face in the last four decades. If these prices go up, the inflation will continue to rise even further increasing the cost of living for Americans.
The crisis in Ukraine could also rattle U.S. markets. Economists say if there’s an invasion, we could see a selloff in stocks as investors face the fear of an oil shock and higher inflation. It could also mean higher borrowing costs.
Economists warn that if inflation spikes above 10%, the fed could come under pressure to get prices under control, possibly rising interest rate hikes quicker to cool off inflation.