Alexandros Avramidis via Reuters
INFLATION – The deadly fighting in Ukraine has been going on for 11 days, with no real signs of diplomatic easing, as of Monday, March 7. Results? Western countries are stepping up sanctions against Vladimir Putin’s Russia, stock markets are falling and the prices of many commodities, which have been under pressure for several months as a result of the economic recovery, are rising slightly amid fears of destabilization of global purchasing.
Producers, buyers and investors are now concerned or expect major disruptions to exports from Russia and Ukraine, aside from a possible future embargo on certain Russian products.
These significant price increases, exacerbated by the fall of the euro against the dollar, are already visible in the prices of fuel, wheat or maize for farmers and consumers, but they will also affect many industrial sectors. The HuffPost takes stock of the rise in commodity prices.
Gas price reaches all-time high
The most spectacular increase is in gas prices sold on European markets. Europe is much more dependent on Russian gas than the United States. The war and sanctions against Russia – which supplies 40% of the European Union’s gas imports – have exploded the market reference in Europe, the Dutch TTF. This Monday, March 7, it exceeded 260 euros, breaking a new record, while the price was less than 20 euros a year ago.
“In our view, the market now takes it for granted that a very important gas pipeline running through Ukraine will be damaged by the fighting,” said an analyst interviewed by AFP Monday morning. This while Germany has already suspended the Nord Stream 2 gas pipeline project.
In addition, members of gas exporting countries, including Qatar, have warned that they have limited capacity to rapidly increase supplies to Europe. The European Union imports 40% of its gas from Russia, France almost 20%.
The barrel of oil is above USD 130
The price of a barrel of Brent from the North Sea, one of the two market benchmarks, came close to USD 140 on Sunday evening, close to the all-time high of USD 147.50 in July 2008. As far as Russian exports are concerned, supply is being affected, especially because certain financial and banking sanctions make certain purchases with Russia impossible.
Faced with the worsening war in Ukraine, US Secretary of State Antony Blinken said on Sunday that the United States and the European Union were “very actively” discussing the possibility of banning Russian oil imports. Ukrainian President Volodomyr Zelensky has also called for this.
However, Europeans are more cautious, as some regional states, such as Germany, are heavily dependent on Russian oil and gas. Our neighbour, and leading economic partner, imports 55% of its gas, 42% of its oil and coal from Russia. A dependency that the government has been self-critical about since the invasion of Ukraine, but will take years to reduce.
“We will all have to make an effort”, “all pay much more attention to our energy consumption”, “all realize that we are entering a new world”, he said on Monday, the Minister of Economic Affairs, Bruno Le Mayor on BFMTV and RMC, in which it is stated. indicated that in the coming days an answer will be given to the French who have been “most affected by the crisis” and the rise in fuel prices. The price of diesel rose on average last week by 14 cents per liter in France, that of SP 95-E10 by 7 cents.
For its part, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decided on Wednesday to gradually open the floodgates despite the price spike.
In terms of energy prices, oil and gas are not the only products seeing their prices rise. Another highly polluting fossil fuel, coal, is seeing its price rise. Faced with fears of shortages in Europe, the price shattered its all-time high of more than $400 a ton on Thursday, from a previous record close to $300 in October 2021.
Towards more expensive cars with the rise of minerals and metals?
In the wake of energy prices, rising prices are affecting many metals, especially those produced in Russia. Aluminum – whose production is particularly greedy for electricity – surpassed the $4,000 per tonne bar for the first time in London, while copper hit new historic highs. These materials are used in many industries from automotive, transportation, construction and electronics.
Without reaching the last peaks of 2007, the price of nickel rose by more than 25%. Russia was the world’s third largest producer, after Indonesia and the Philippines, but second only to China in refined nickel. However, the metal is one of the most in-demand in the world in electric battery factories, which should enable the automotive industry to abandon oil.
The situation in Ukraine is also causing precious metals to skyrocket like gold, a safe haven for investors, which topped $2,000 an ounce Monday morning, hitting the highest level since September 2020. But the star of the precious metals market is palladium, of which Russia almost half of the world market. Up more than 50% since the start of the year, this metal primarily used by the automotive industry to design catalytic converters is nearing its all-time high.
All these increases, even if they are leveled off and passed on over several weeks, raise fears of an increase in construction costs and thus in sales of cars, computers or even telephones, sectors already affected by the shortage of semiconductors. In addition, some builders have factories in war zones and this has an immediate impact on production.
Absolute record for wheat, farmers worried
The price of wheat, of which Russia and Ukraine together account for nearly 30% of world exports, hit a record high on the Chicago Stock Exchange on Friday, breaking a 14-year-old record. In Europe, the price of wheat has soared since the start of the conflict, reaching an unprecedented price on Monday, namely 450 euros per tonne.
As a result of the conflict, several million tons of wheat, maize or sunflowers are blocked in the ports of the Black Sea, especially in Odessa. Famous for its sunflower fields as far as the eye can see, Ukraine is also the world’s largest producer of oilseeds and the world’s largest exporter of its oil, putting pressure on the oil market.
The grain supply to many African countries, which are increasingly dependent on Russian and Ukrainian wheat, is a cause for concern. During the last food riots, the price of wheat was much lower than it is today. France has an exportable surplus of wheat and maize, but that does not compensate for the damage caused by the conflict and its impact on the livestock and meat sectors.
See also on The HuffPost: This couple got married on the defense line in Kiev during the war in Ukraine