The Russia-Ukraine War is Impacting Gas Prices
- On February 24, 2022, Russia launched a full-scale attack into Eastern Ukraine to take over Kyiv, the capital of Ukraine.
- As a result of Russian President Vladimir Putin’s actions, Canada, Taiwan, New Zealand, Japan, the European Union (E.U.), United Kingdom (U.K.) and the United States (U.S.) announced sanctions on Russia’s oil, banks, and military.
- As Russia is one of the leading suppliers of oil and gas, the sanctioning of Russia’s natural resources will cause the global price of these natural resources to increase, potentially leading to inflation.
On February 24, 2022, Russian President Vladimir Putin decided to deploy Russian troops to invade Eastern Ukraine and take over the Ukrainian city capital Kyiv to overthrow current Ukrainian President Volodymyr Zelenskyy and replace him with a pro-Russian President. Putin believed the invasion into Ukraine would not take long and had expected to reign control over the Ukraine capital within a week.
However, the Russian military is struggling to gain control of major Ukrainian cities as the Ukrainians are defending their territory better than what the Russian government had anticipated. Consequently, this has led to many Russian soldiers being captured, killed, or wounded.
Furthermore, the invasion has taken longer than Putin had anticipated, and many countries worldwide have sanctioned Russia. Due to the sanctions being placed on Russia, a country that possesses large sums of oil and gas, prices of many necessities have begun and may continue to rise in the United States (U.S.).
Current Status of the Russia Ukraine War
After a week and a half of fighting, Russian armed forces have only been able to gain control over the port city of Kherson, located in the southern part of Ukraine. However, due to the ongoing bombings and gunfire, Russia and Ukraine have reached a limited ceasefire, allowing people in Eastern Europe to flee the area. According to various news agencies, around one million people have already fled Eastern Europe with the help of various refugee agencies and emergency services.
How the Russian Invasion Affects Gas Prices in the U.S.
As mentioned before, many countries have come out and publicly berated Russia’s actions regarding the invasion of Ukraine, with many of these countries also imposing sanctions. Canada, Taiwan, New Zealand, Japan, European Union (E.U.), United Kingdom (U.K.) and the U.S. announced their disassociation with Russia by imposing sanctions on their banks, military, and oil.
Sanctions are a form of severe penalties that are put on countries, companies, and individuals if certain laws are violated. In the case of Russia, they are conducting war crimes due to the bombings that are being targeted towards civilians.
Supply and Demand
The Russian economy is not as prominent compared to the United States; however, they are the third-largest oil exporter and second-largest gas exporter. Thus, due to the high volumes of gas and oil that Russia supplies to the world economy, the sanctions imposed by many powerful countries could harm themselves.
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As these major countries are not condoning the use of Russian natural resources, there will be less supply in the market that countries can purchase. In the law of Supply and Demand, when there is less supply of an essential commodity, it leads to higher prices. Consequently, this will cause countries on a global scale to have higher prices concerning gas and oil as it costs them more money to obtain these resources than before.
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Effects on the U.S. Economy
Fortunately for the U.S., only 1.3% of its total oil was purchased from Russia, showcasing their lack of dependence on the Russians for this resource. However, although they do not buy a large sum of oil from Russia, their significant presence in natural resources cannot be ignored. With the new sanctions, the U.S. must pay higher sums of money to obtain similar oil levels from other countries.
Due to the sanctions, oil prices have exceeded $100 for the first time since 2014. The rising oil prices will cause inflation. In addition, companies that purchase these natural resources must pay a higher sum to obtain them. Consequently, they will increase their prices, leading to a higher portion of a person’s income spent on gas.
The high gas prices may result in other companies raising their prices to ensure their profits are not affected. Rising prices mean the everyday worker is left in a financially distressed situation as their current income level will be insufficient to accommodate the rising costs.
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It is difficult to determine whether Russia will continue fighting in Ukraine to gain control of the capital due to their recent hardships in advancing towards central Ukraine. However, regardless of what Russia’s intentions are with attempting to take over Ukraine, one thing is certain, the continued war is affecting everyone worldwide.
What are your thoughts on rising gas prices due to the Russia-Ukraine conflict? Please share your thoughts with us in the comment section below.
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