What the Russian Situation Means for the American Economy
To say the situation on the Russian-Ukrainian border is tense would be the understatement of the century. With troop build ups on both sides of the border with Russian and Ukrainian/NATO forces gathering on opposite ends. The Central Intelligence Agency has claimed that Russia is likely to commit a false flag attack as an excuse to invade Ukraine. Vladimir Putin has alleged that the Ukrainian government is responsible for the massacre of ethnic Russians in eastern Ukraine. War has besieged Ukraine. But what does this tension mean for Americans and the American economy? In short, nothing good.
Russia is the second largest oil producer in the world, producing nearly ten billion barrels of oil daily. The United States is heavily reliant on Russian oil, importing 17 million barrels per month as of November 2021, even more than is imported from Saudi Arabia, according to the US Energy Information Administration. As a result of the invasion, oil prices have risen drastically. The price of oil sat above $100 per barrel for much of March, the highest price seen in many years, per Reuters.
John Kilduff, a New York investment adviser, told Reuters, “The market is hypersensitive to the developments over the Russia/Ukraine situation. This is now intensifying to a terrific degree. Right now, it’s buy now, ask later.” Everyone is trying to get their hands on whatever oil resources they can right now in case they will not be able to as the result of future conflict. This is significantly driving up the price of oil.
What does this mean for the American consumer? Quite simply, it is yet another factor added into the disastrous gas-price crisis this country has been facing for a while now. Over the past year inflation drove up gas prices significantly. Now, they are increasing even more drastically. The average price of a gallon of gas in the U.S. now sits at $4.15, as of April 7, with California, Hawaii and Nevada hitting more than $5 per gallon, according to AAA. It has gotten to the point where it is difficult for low-income families to afford to drive to work. If automobile transportation becomes impractical, then consumers will take out fewer and fewer loans for cars, damaging the lenders as well.
The tensions resulting from the Russia-Ukraine situation have wreaked havoc on the global oil market. The already inflated gas prices in the United States have only continued to increase at an even faster pace. The financial crisis resulting from the tensions, however, began long before the war.
