Raphael Stevens

Russia’s invasion of Ukraine last week is pushing up the price of gasoline, and may lead to higher costs for food and electronics like smartphones, according to economists.
Russia is a major exporter of oil, wheat and palladium. Prices for those materials have spiked as a result.
Inflation is already rising at its fastest annual rate in 40 years.

A taxi driver refuels a vehicle at a Gulf gas station in Boston on Mar. 1, 2022.
Vanessa Leroy/Bloomberg via Getty Images

The economic effects of Russia’s invasion of Ukraine a week ago have reverberated around the globe — leaving many households to wonder how the conflict might hit their wallet.
The short answer: Prices may be going up, especially for gasoline (and indeed already have). Costs for food and goods like smartphones may also rise, according to economists.

Inflation would largely result from shortages and rising costs of raw materials like oil, wheat and metals like palladium — all of which Russia is a major producer.   
It would also come at a time when consumer prices are already rising at their fastest annual pace in 40 years.

Yet some of the inflation (if it comes to pass) will likely take months to appear, economists said. The timing and scale are hard to predict given the fluidity of the military conflict, novelty of Western sanctions against Russia and possibility of yet harsher ones.
“What makes projecting this stuff so difficult is, all these measures are so new and so unprecedented as a model,” according to Julia Friedlander, a senior fellow at the Atlantic Council and a former advisor on sanctions policy at the U.S. Treasury Department.
“What’s it like to take the 11th largest economy offline in the course of days?” she said.

The Federal Reserve is also expected to start raising interest rates this month to fight inflation.

Oil and gasoline

The price of gasoline is how consumers are most likely to feel the war’s inflationary impact in the short term, according to economists. Indeed, gas prices have risen since Russia’s saber-rattling started, even before the Feb. 24 invasion.
Crude oil is the main component of gasoline.
It accounts for 56% of what Americans pay at the pump, according to the Energy Information Administration. That’s why higher oil prices often translate to higher gas prices.
The Ukraine-Russia conflict pushed U.S. oil prices on Thursday to their highest level since 2008, at well over $100 a barrel. The global price jumped to a high unseen since 2012.
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Gasoline prices, in turn, edged up to $3.61 a gallon, on average, as of Monday — a jump of 33 cents a gallon since the beginning of 2022, according to federal data.
If high oil prices are sustained, the average cost may soon breach $4 a gallon, according to Andrew Hunter, a senior U.S. economist at Capital Economics.
That price would translate to an additional $75 billion of annual spending for households to fill up their gas tanks (relative to prices of $3.40 a gallon at the end of January), Hunter wrote in a research note Tuesday. The dynamic could cut households’ disposable income by 0.5%, he said.
“The single biggest issue is definitely what’s happening to oil prices,” Hunter said of the crisis’ consumer impact. “It looks like there’s more pain to come, unfortunately.”
President Joe Biden acknowledged the likely financial sting in his State of the Union speech Tuesday night. The U.S. and 30 other countries are releasing 60 million barrels of oil from strategic stockpiles, only the fourth time such a coordinated release has occurred, to try diluting the price surge.
“A Russian dictator, invading a foreign country, has costs around the world,” Biden said. “These steps will help blunt gas prices here at home.”

Food

The Russia-Ukraine conflict has the potential to impact food prices — though the effects will likely be felt most acutely overseas, economists said.
Russia is the world’s largest wheat exporter. Ukraine and Russia together account for almost 30% of global wheat exports.
Wheat prices on Wednesday surged to their highest level in 14 years. That could impact prices for bread, pasta, cereal, baked goods and other wheat-reliant foods, if producers pass higher costs on to consumers.
Russia and Ukraine are also major exporters of other food products like barley, sunflower seed oil and corn.
However, the U.S. is a net exporter of agricultural commodities, particularly wheat, corn and soybeans, which will likely dilute any impact, according to Hunter.
“I wouldn’t expect grocery prices to suddenly start rising now because of these moves,” he said. “If they’re sustained, it’s something you could potentially start to see over the coming months.”
Higher food prices are much more of an issue for the developing world, Friedlander said. Turkey, Egypt and Kazakhstan are the three biggest buyers of Russian wheat, respectively, for example.
“I don’t think it will affect the price of bread in Ohio,” Friedlander said.

Cars and technology

Russia is the world’s largest producer of palladium, supplying about a third of global demand.
Palladium is a metal used to manufacture semiconductor chips, also known as microchips, which are found in a range of consumer electronic products like smartphones, computers, TVs and digital cameras. Ukraine and Russia also account for the bulk of U.S. neon supply, also used for chip production.
Palladium is also a key metal used in catalytic converters, which control tailpipe emissions from cars.
“[That] will trickle down to production of high-end technology that relies on the Russian market,” Friedlander said of Russia’s palladium exports.
“It’ll take a while for the price to rise in the iPhone you buy, but eventually that could [happen],” she added.

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U.S. oil surged to the highest level since 2008 on Thursday, and Exxon CEO Darren Woods said prices could be heading much higher.
“If there is a significant supply disruption with respect to Russian crude … that will be very difficult for the market to make up and therefore that will lead to, I think, significantly higher prices,” he told CNBC Thursday.
West Texas Intermediate crude futures, the U.S. oil benchmark, hit $116.57 per barrel, the highest level since September 2008.

Darren Woods, Chairman and CEO, Exxon Mobil.
Katie Kramer | CNBC

U.S. oil surged to the highest level since 2008 on Thursday, and Exxon CEO Darren Woods said prices could be heading much higher.
“If there is a significant supply disruption with respect to Russian crude … that will be very difficult for the market to make up and therefore that will lead to, I think, significantly higher prices,” he told CNBC’s “Squawk on the Street.”

Oil prices surged above $100 per barrel last week as Russia invaded Ukraine, prompting supply fears in what was an already very tight market ahead of the invasion. Prices have kept climbing as the fighting intensifies.
West Texas Intermediate crude futures, the U.S. oil benchmark, hit $116.57 per barrel on Thursday, the highest level since September 2008. International benchmark Brent crude rose to $119.84, a price last seen in May 2012.
So far, the sanctions imposed by the U.S. and its allies have not targeted Russia’s energy complex directly, but the ripple effects are being felt. International buyers are shunning Russian oil to avoid potentially violating the financial sanctions.
Additionally, companies, including Exxon, are pulling Russian operations.
The oil giant announced Tuesday evening that it was halting operations in the country and would make no further investments. The announcement came after BP and Shell said they would divest from their assets in Russia.

“Our business engages significantly with the government, the host governments where we operate. We felt like the decisions that were being made by the Russian government with respect to its incursion in Ukraine were inconsistent with our philosophies and how we run our business,” Woods told CNBC.
He said Russia’s invasion was a “tipping point” in terms of working with the country, but left open the possibility of re-entering it at a later date.
“We’ll keep an open mind,” he said, before adding that “things would have to change pretty significantly, frankly.”
Prior to Russia’s invasion, oil prices were at multiyear highs. Demand has bounced back since the depths of the pandemic, and producers have kept supply in check. OPEC and its allies, which includes Russia, met Wednesday and said they would keep output steady. In April, they will raise production by 400,000 barrels per day, sticking with a previously agreed schedule.
Producers in the U.S. also have kept supply in check. As energy companies emerge from the pandemic, shareholders are demanding stricter capital discipline with an emphasis on capital return in the form of dividends and buybacks. So while in prior years prices above $100 would have led to an uptick in drilling, it hasn’t happened this time around.
Still, Woods said Exxon is “maximizing production” and expanding its operations in the Permian Basin.
He added that the market signals are working, which should ultimately bring more production online across the industry.
“That price response that we’re seeing is the outcome of a tight supply-demand balance. Marginal sources of supply …come into the marketplace and so I think you’ll see that price draw more resources,” Woods said.

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Americans who identify solely as Black or African American make up 13.4% of the U.S. population today, but less than 1% of all FDIC-insured banks are considered Black-owned.
The number of Black-owned banks has dwindled immensely over the years.

Big banks and corporations like Yelp, Netflix, and Microsoft have announced major investments in Black-owned banks.
Yet Black banks are far from thriving. Americans who identify solely as Black or African American make up 13.4% of the U.S. population today, but less than 1% of all FDIC-insured banks are considered Black-owned.

The number of Black-owned banks has dwindled immensely over the years. Between 1888 and 1934, there were 134 Black-owned banks to help the Black community. Today, there are only 20 Black-owned banks that qualify as Minority Depository Institutions, according to the Federal Deposit Insurance Corporation.
“I think part of it has to do with the broader trend in the banking community,” said Michael Neal, senior research associate at the Urban Institute. “We’re seeing the number of banks overall declining and assets being concentrated, particularly in your larger global and more complex financial institutions.”
Black-owned banks lack the assets needed to compete against major players. For example, one of the biggest Black-owned banks in the U.S., OneUnited Bank, manages over $650 million in assets. By comparison, JPMorgan and Bank of America each manage assets worth well over $2 trillion dollars.
“Whatever the struggles are of the community, the banks have the same struggle because they’re enmeshed in that community,” said Mehrsa Baradaran, professor of Law at the University of California Irvine. “They cannot change it unless the community itself has more wealth and has more access, and we have less discrimination as a society.”
Watch the video to find out more about why Black-owned banks are so important to achieving financial equality and what’s stopping them from thriving.

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Federal Reserve Chair Jerome Powell speaks Thursday before the U.S. Senate Committee on Banking, Housing and Urban Affairs in day two of his congressionally mandated semiannual testimony on monetary policy.

In remarks Wednesday before the House Financial Services Committee, the central bank leader said the war in Ukraine had “highly uncertain” potential impacts on the economy. But he said the Fed is still prepared to move forward with interest rate increases aimed at taming runaway inflation.
Powell noted that the lookout otherwise is solid, with an “extremely tight” labor market and price pressures that he still expects to recede later in the year. He expects the Fed to raise its benchmark borrowing rate a quarter-percentage point at the March policy meeting, but added that he will consider potentially larger increases if inflation remains hot.
“I think it’s appropriate for us to move ahead. Inflation is high. The committee is committed to using our tools to bring it back down to levels of price stability, which is to say 2% inflation,” he said Wednesday. “I would also say that given the current situation, we need to move carefully and we will. We need to be nimble.”

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