How the Conflict Influence Our Life

There was so much oil in April 2020 that the price of a barrel of oil in the American state of Texas fell below $0 for a short time. Sellers had to pay buyers to take it.

Less than two years later, the international price of a barrel of oil rose above $100 Thursday. The increase followed the Russian invasion of Ukraine. And it came at a time when the world's economy is slowly recovering from the COVID-19 pandemic.

Russia and Ukraine together produce less than two percent of the world's gross domestic product - the total market value of both countries' finished goods and services. But the conflict has increased existing inflation. This has frightened investors and affected everyone from Europe to Asia and Africa.

Inflation

Rising energy and food prices will increase pressure on policymakers and central banks struggling to control inflation. The London-based research firm Capital Economics estimated that the Ukraine crisis could force higher natural gas prices and send oil prices up to as much as $140 a barrel.

That combination would add two percentage points to yearly inflation in the world's rich countries, Capital Economics said.

In the United States, prices of goods, not including energy and food, rose at a rate of 7.5 percent for the 12 months ending in January. It was the highest yearly increase in 40 years.

As of Thursday, the American Automobile Association said the national average gasoline price in the U.S. is $3.54 a gallon, about 3.8 liters. A gallon of gasoline cost $2.66 just one year ago.

Lower stock prices

The values of stocks, however, dropped in most financial markets around the world.

In Russia, the Moscow stock exchange dropped nearly 45 percent Thursday following President Vladimir Putin's announcement of a "military operation" against Ukraine. And the nation's currency, the ruble, dropped to a record low against the American dollar.

Some fear that financial markets could become riskier if the U.S. bans Russia from the worldwide financial payment network SWIFT. The network links thousands of banks and permits them to exchange payments around the world.

Such a move would cut off oil payments to Russia which add up to 40 percent of the country's revenue. But it could also hurt U.S. and European companies that do business with Russian companies.

Elina Ribakova is an economist with the Institute of International Finance in Washington, D.C. She said risk is not limited to Russia.

"There is a risk for global finance as much as there is for Russia," said Ribakova.

Peace and Love.