War in Ukraine: US is feverish on gasoline prices, and the world is at risk of stagflation
The war in Ukraine will have a serious impact on the global economy.
In the United States, retail prices for gasoline and diesel fuel rose to record highs. The US authorities say that day by day the average price of fuel is updating the historical highs recorded during the 2008 fuel crisis.
Как сообщает CNN, American drivers have never paid so much for gas. According to the publication, the price of a gallon ( 1 gallon - 3,7 liters) gasoline is now $4,17, beating the previous record of $4,11 per US gallon, which has held since July 2008.
As Russia continues its military offensive in Ukraine, gas prices are rising faster than after Hurricane Katrina hit oil platforms and refineries on the Gulf Coast in 2005. The average price of $4,17 means the price is up 55 cents a gallon in the last week alone and 63 cents, or 18%, since February 24, the day Russian troops invaded Ukraine.” - reports the media.
Note that the lowest price of gasoline in the United States was recorded in the spring of 2020. Back then, in some states, a gallon of gasoline cost less than a dollar.
Experts attribute the rise in gasoline prices to high oil prices and messagethat the United States will limit the import of energy resources from Russia. To curb the rise in fuel prices, strategic reserves of crude oil will be released - we are talking about almost 62 million barrels.
Saudi Arabia and the UAE are the only major oil producers that could increase production by millions of bpd. However, by words a number of foreign media, they refuse such a step, declaring their intention to comply with the agreement between OPEC and Russia to regulate oil production.
President of the European Commission Ursula von der Leyen noted thethat all Europeans can contribute to reducing energy dependence on Russia if they start saving more.
“We can all contribute to reducing dependence on Russian gas and energy resources in general by saving energy. Everyone can join this, von der Leyen said.
She also defended the EU's position that Europe cannot yet support an embargo on Russian energy imports, as the US did.
“We need to make sure that oil prices do not rise too much - because this will weaken us”- said the President of the European Commission.
However, the biggest risk to the global economy is that a war in Ukraine could lead the world into stagflation. Stagflation is a state of the economy in which activity slows down and prices rise.
Economists expect the European economy to suffer quite noticeably. Analysts at Barclays revised their forecast for EU economic growth this year by 1,7 percentage points to 2,4%. The pace of private consumption, investment and exports across the continent is expected to decline. At the same time, energy prices and other commodities such as wheat and metals are rising rapidly. Barclays raised its European inflation forecast for 2022 by 1,9 percentage points to 5,6%.
“In other words, war provokes stagflation, which is a period of high inflation and weak economic growth. The most recent example is in the 1970s, when an energy supply shock hit the economies of developed countries.” - reports CNN.
According to Capital Economics, a complete ban on Russian energy imports will push Brent oil prices up to $160 a barrel and send the EU into its third economic depression since the start of the coronavirus pandemic.
Analysts polled by CNBC warned about the risk of a significant increase in the price of a number of goods, including food products, around the world due to a ban on oil imports from Russia to the United States. In the future, this may lead to a recession and a global crisis. According to the head of oil trader Lipow Oil Associates Andy Lipow the rise in prices that has already happened could cause a recession in the countries of South America. It will then spread to the US and eventually affect China's export potential, which will reduce demand for goods.
Premier of the State Council of the People's Republic of China Li Keqiang warned about the “serious and unclear” outlook amid the coronavirus pandemic, the slump in property prices and the uncertainty associated with the war in Ukraine, as well as the lowest GDP growth in the last three decades. According to him, it will be 5,5 percent - the lowest figure since 1991.
We previously reported about the consequences of the war for the economy of Ukraine.
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