The Russian invasion will make a bad inflation situation worse

The Russian invasion of Ukraine will lead to higher food and energy prices

The Russian invasion of Ukraine will worsen an already bad inflation situation in the U.S.

Russia is one of the world’s biggest exporters of oil, and Russia’s oil is sitting unsold because of uncertainty around sanctions and shipping dangers because of the war, which is raising energy prices.

Gas prices are rising significantly. Gas prices are currently $4.33 per gallon on average, up from $3.48 per gallon a month ago and $2.84 per gallon a year ago, according to the AAA gas price tracker.

Both Saudi Arabia and the UAE aren’t talking to President Joe Biden after he’s tried to arrange calls with them to persuade them to export more oil. That’s because they’re at odds with the U.S. over a number of policy issues, including the war in Yemen. So Biden’s attempt to replace Russian oil with more Saudi or UAE oil is facing roadblocks. Therefore, the price of oil is likely to stay high or increase further over the next few months.

The Russian invasion also will raise food prices. For one thing, energy prices are a big component of food prices. That’s because higher energy prices raise the cost of fertilizer and transporting food. In addition, Russia is the world’s largest exporter of wheat, and Ukraine is the world’s fifth-largest. Together, they account for approximately a quarter of the world’s wheat exports. Ukraine is also the world’s fourth-largest corn exporter and the world’s largest sunflower seed producer.

Ukraine’s ports are shut because of the war, and Ukraine has banned the export of wheat, oats, and other food staples to ensure that they can meet the food needs of their own population. Wheat prices have spiked since the invasion started.

Inflation measured by the Consumer Price Index could reach close to 9 percent in the next couple of months, Alan Detmeister, an economist at UBS, told The New York Times.

Expect higher food and energy prices as a result of the Russian invasion of Ukraine. This will exacerbate the forces that were already causing prices to rise, such as supply chain problems and fiscal stimulus that raised demand above supply.