Inflation rate could exceed 10% due to crisis in Russia and Ukraine


Inflation in the US dollar could exceed 10 percent if Russia invades Ukraine, according to a new report.

An analysis conducted by consulting firm RSM and first reported by CNN predicted that inflation could rise to its highest level in 40 years if tensions between Russia and Ukraine turned into a full-scale war. ..

Oil prices are the main driver of such rising inflation, which can well exceed $ 100 a barrel in the event of a protracted Russian-Ukraine conflict. Already, shortly after the recent Russian mobilization along the Ukrainian border, oil prices exceeded $ 90 per barrel. If oil rises above $ 110 a barrel, it could be enough to boost annual inflation.

Russia is the world’s second largest producer of oil and is reported to have produced 524 million metric tons in 2021. If NATO retaliates against Russia’s military action in Ukraine by imposing trade sanctions on Russia, or in the war in Eastern Europe, it could send a shock wave to the entire world’s oil supply and raise prices across the western world. There is sex.

Oil prices are already skyrocketing in the United States, with gas prices rising 40% between January 2021 and January 2022, with overall inflation of 7.5%, according to recent data from the US Bureau of Labor Statistics. Has been reached. Same period.

These rises in oil prices are, at least in part, due to the pendulum shift in the oil industry, resulting in regular shifts between oil-rich and oil-deficient periods. When oil is plentiful, companies do not focus on oil production and prefer to make a profit for investors based on previously built infrastructure.

Since 2014, the oil industry has generally relied on infrastructure built during the oil crisis. This business decision seems to bear rotten fruit at the most inconvenient times, as the country is working on the highest general inflation rates in decades.

In addition, labor shortages in the domestic economy have been particularly devastating to the oil industry, resulting in an inadequate number of technically qualified workers for oil rigs. This is primarily due to the focus on renewable energy, and many future oil workers conclude that their careers in this area do not promise a long-term outlook.

If oil prices soar as a result of the situation in Russia and Ukraine, it could send a shock wave to the economy during the fragile period of recovery from the first wave of the CCP (Chinese Communist Party) virus pandemic and subsequent blockages. .. The Federal Reserve has already indicated its intention to pursue a rate hike regimen in 2022 to curb inflation, but the immediate consequences could be employment recovery and stagnant GDP growth.

But the immediate impact will be a burden to consumers who are already on the cusp of rising oil prices in years of severe inflation and penalties. This especially affects Americans living in rural and suburbs, where gasoline costs account for a higher proportion of overall living costs. But no one can escape the overall devastation of oil price inflation. Even non-driving people will see fuel costs reflected in the prices of goods that carry medium and long distances.

If the situation in Russia and Ukraine continues to deteriorate, these problems can be significantly exacerbated.

Nicholas Dringer

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Nicholas Dolinger is a business reporter for The Epoch Times and author of the “The Beautiful Toilet” podcast.

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