Commodity prices are telling a story right now and we should listen. Oil, Oil, Oil, seems to be on everyone’s mind. With the price of oil nearly reaching $140 a barrel, let’s discuss.
A significant supply of oil is gone from the market. Now that Russian oil is largely gone from the market, prices are increasing on the remaining supply of oil inflows from other producers.
Meanwhile, some reports have said that Russia is selling barrels of oil for as low as $15, while the global markets price a barrel at $107 at the time of this article (March 10th, 2022).
High oil prices impact everything in our economy. High oil prices are like high Ethereum gas fees; it makes all activities more expensive. Every combustion engine has become costlier to run. Shipping and transportation just got more expensive. General economic activity has become costlier.
However, oil is not the only concern in this economic battle – we are now facing a danger in the exportation of wheat.
Russia and Ukraine account for ~30% of the world’s global wheat exports. Wheat futures are up 40%, the biggest weekly rise in decades. African economists have ‘raised the alarm’ to the potential damage a prolonged conflict between Ukraine and Russia might inflict on the continent.
Now let’s take it even further down the rabbit hole – what about European natural gas?
Europe is a major buyer of energy from Russia, and with Ukraine’s supply of energy threatened, the costs of keeping the lights on in Europe have gone up.
In fact, commodities, in general, are all up.
If increased commodity prices sustain for a sufficient amount of time, it will begin to have serious knock-on effects on global production.
Oil price rises are akin to rate hikes. They inhibit economic activity and at sufficiently high levels, plunge us into recession. Energy gives us fertilizer and fertilizer gives us food, costly energy equals starving in the dark.
Inflation and Supply Chains
There are some pretty nasty stars aligning at the moment. Right as the Fed begins to raise interest rates to combat inflation, a war in Europe triggers a gut-punch to already strained supply chains.
Inflation has already caused disruption in labor supply and business viability. Can businesses survive the knock-on effects of a sustained Russian invasion?
Putin does not seem like he’s giving up in Ukraine. Meanwhile, the unified anti-Russian spirit of the Ukrainian couldn’t be higher and have also been resupplied with new armaments from various European suppliers, 40% of which were willing to accept the donated cryptocurrency as payment.
Both sides digging in for the fight.
At the time of this article the writers were actively using Coinbase, FTX, Metamask, Trust Wallet, Crypto.com, Binance, Robinhood, Webull, KuCoin, Voyager and Hotbit. They also own currencies: BTC, ETH, USDC, SOL, AVAX, ALGO, MATIC, CRO, ENS, DOT, XLM, MANA, RARI, ENJ, XRP, FIL, SAND, HNT.
