How has the War in Ukraine Affected the World's Economy?

 How Has The War In Ukraine Affected The World’s Economy?

Evan Tank B1

One of the most prevalent topics of discussion on the news is the war taking place in Ukraine. With Russia invading Ukraine on 24 February 2022, the invasion has triggered Europe's largest refugee crisis to take place since World War II, causing more than 4.5 million Ukrainians leaving the country and a quarter of the Ukrainian population to be displaced. But how has this war taking place thousands of miles away affecting not just the U.S. economy but the world’s economy and how long will it take for the economy to return to normal?

One of the most devastating effects of Russia’s invasion of Ukraine is the high increase in gas prices. According to WickerSenate.gov, “Oil prices recently topped $100 per barrel for the first time since 2014”. With further research, in 2014, the gas prices returned to normal by July 28, the highest gas price recorded in 2014 was $3.71 per gallon for the week of April 28. The high gas prices were due to surging demand from developing economies, stagnant production, and financial speculation. But what does the war in Ukraine have to do with our gas prices? Well according to eia.gov, the top five source countries of U.S. gasoline imports as of  2021 were Canada, Mexico, Russia, Saudi Arabia, and Colombia. As of March 8, President Biden placed a ban on imports of gas from Russia. With one of the five major gasoline providers for the U.S. gone, this has caused the price to go up significantly. Looking back at the gas price surge of 2014, judging by the time it took for the prices to return to normal, gas prices will hopefully drop back down by around July.

Ukraine and Russia are also some of the world's top major commodity producers. Due to their conflict, food costs have jumped, especially with wheat. Ukraine and Russia together make up a total of 30 percent of global exports of wheat - Russia itself is the world’s largest producer of wheat, making up for around 18% of the world’s wheat exports. As shown in the graph above, the conflict in Ukraine has caused the price of corn/wheat to reach an all time record. 

View the video below to get a better understanding on how long Russia has been the world’s leading exporter of wheat.

Link to Video

Ukraine is also the world's biggest exporter of sunflower oil. Due to the war, there has been a shutdown of exports that has affected global food prices significantly. According to the World Bank, “The war had made economic activity impossible in large parts of the country, disrupting farming and harvest operations”. Due to Ukraine not being able to produce their largest export, their economy has been heavily impacted. On the path that Ukraine's economy is heading on, the Ukrainian economy is set to be cut by almost half.

With all of this taken into account, it isn’t easy to determine when the world’s economy will return to normal. With the two biggest exporters of wheat, and sunflower oil and one of the biggest oil exporters (Russia) bringing their production to a halt and prices on necessities like food and gas going up, it’s very unclear what the lasting effects will be even after the war is over. Just because the war ends doesn’t mean the economy will return to normal, all of the production will need to be made up for which will definitely take some time, especially since both countries are going to be financially down due to their money spent on war efforts. With that being said, there is no true time for which the effects of Russia’s invasion of Ukraine will last on the global economy.

Works Cited

“Frequently Asked Questions (FAQs).” EIA, 9 March 2022, https://www.eia.gov/tools/faqs/faq.php?id=727&t=6. Accessed 11 April 2022.

Pangestu, Mari. World Bank Group - International Development, Poverty, & Sustainability, https://www.worldbank.org/en/home. Accessed 11 April 2022.

“Wicker: Putin's War on Ukraine Will Affect Us All.” Senator Roger Wicker, 28 February 2022, https://www.wicker.senate.gov/2022/2/wicker-putin-s-war-on-ukraine-will-affect-us-all. Accessed 11 April 2022.