In the aftermath of Putin’s invasion of Ukraine, strained and fragile supply chains around the world are already feeling the squeeze. According to a new report by Dun & Bradstreet, an American company that provides commercial data, analytics, and insights, the global knock-on effect of dependencies on businesses in the Ukraine region is even now being felt. The report states that 374,000 businesses worldwide rely on Russian suppliers – 90% of these are based in the US. About 241,000 businesses depend on Ukrainian suppliers and 93% are based in the US. Here, we take a look at just three of the ways the war in Ukraine could affect American consumers and the US economy.
Oil and energy prices
In response to the sanctions imposed by the US, Russia could hit back by terminating oil and natural gas exports to America. That would put enormous pressure on gasoline and natural gas prices in the US, which have already been soaring this year. According to the American Automobile Association, the price of gas has risen to a national average of $4.33 per gallon, and has exceeded $7 in some parts of California. As Patrick DeHaan, head of petroleum analysis at GasBuddy rather ominously puts it, “The world economy does depend on global energy. How does the world sanction Russia’s economy without Russia saying, ‘We’re going to take the next step for you and not export any more energy’? If Russia’s economy is going down the tubes, they’re going to take the global economy with it.”
After Canada, Russia is the world’s second-largest producer of potash, a key nutrient used in major commodity crops and produce. Russia and Ukraine also account for more than 25% of the world’s trade in wheat, about 20% of corn sales and 80% of sunflower oil exports. Disruptions in the supply of these commodities could send global food prices higher and put even more pressure on US consumers. According to Patrick Donnelly, a senior analyst at Third Bridge, “The most immediate impacts will be further inflation in agricultural commodities and ultimately food prices. Americans should expect to be paying more for their grocery bills this upcoming year.”
Travel restrictions and higher airfares
Ukraine’s airspace is closed and the majority of international airlines have canceled all flights to and from Russia. The EU, Britain and North America have closed their airspaces to Russian flights. “We’ve already seen a tit-for-tat between the UK and Russia in terms of closing airspace, and the FAA has restricted commercial aircraft from flying over Ukraine, Belarus and parts of western Russia. These restrictions, if they hold or are expanded, have the potential to drive fares to the Middle East, Africa and Asia higher,” explained Willis Orlando from Scott’s Cheap Flights. According to a recent survey by MMGY Travel Intelligence, the research division of MMGY Global, the war in Ukraine is now twice as likely to impact Americans’ travel plans to Europe as the Covid-19 pandemic. According to data from Hopper, a flight tracker app, since February 12th, Europe has dropped from 21% to 15% of international bookings – a significant decrease from the approximately 30% of international bookings in the same timeframe in a pre-pandemic year, such as 2019. In addition to travel restrictions and a drop in demand from wary would-be passengers, the war is also likely to have an impact on already high oil prices. “Jet fuel is one of an airline’s biggest expenses, so it follows that persistently high fuel costs might be reflected in slightly higher fares,” Orlando added.
The war in Ukraine is already hitting Americans’ wallets
As commodity prices are already extremely high, any disruptions will have a notable impact around the world. Supply chain problems have dogged US consumers since the start of the Covid-19 pandemic, resulting in long waiting times for goods like cars, electronics and furniture, and hiking their prices. Experts are now pointing to escalating hostilities as a factor that could further aggravate these enduring issues. “What we’re talking about is another round of supply shocks in the developed economies,” said RSM Chief Economist Joe Brusuelas, and Americans are already starting to feel the effects closer to home. “As costly as another European war would be in human and economic terms, its economic burden in the United States would fall hardest on the middle and working classes,” Brusuelas concluded.
We at scoutbee would like to offer our AI-powered supplier discovery FREE OF CHARGE to NGOs that are initially looking for suppliers capable of delivering food, personal care, and hygiene products to those impacted by the war. View our Support Ukraine page for more information on our initiative and how to make use of our offer.