Years worth of tension between Russia and Ukraine have resulted in an unimaginable disaster—the Russian invasion of Ukraine. In a world where our economy has yet to fully recover from the COVID-19 pandemic, the consequences of the ongoing attack on Ukraine have resulted in mass casualties and the potential to impact our global economy for years to come.
Russian & Ukrainian War to Impact Inflation Across the Globe
Natural Gas Prices Increasing at a Record High
The invasion followed weeks of tensions between the two countries, forcing the price of energy to rise tremendously due to Russia being Europe’s major producer of oil and natural gas. Oil rose past $100 a barrel for the first time in over 6 years, while European natural gas prices increased as much as 62%.
As sanctions continue to be imposed on Russia by President Biden, there is an ongoing risk that oil prices could climb even further if Russia decides to retaliate with a “black-out” scenario. Should Russia turn off Europe’s gas supply, experts predict an increase of +2.5pp to the existing inflation forecast of 3.8% this year alone.
Supply Chain Disaster on the Horizon
As fuel costs continue to increase, the already-struggling supply chain industry is destined for future disaster. Ocean shipping and freight transportation can be expected to have further delays and major disruptions as additional sanctions are imposed. Alternative supply sources and redistribution will require long term investments, as the existing pipeline and routes cannot be re-built overnight.
Inflation Continues to Climb
A large amount of the world has experienced record-high inflation rates in 2021 and 2022. While the Russian invasion is still very fresh, and its real impact unfolding slowly, companies may not realize their true exposure to the crisis for weeks, or even months.
Should countries utilize reserves or cover the price increases of natural gas at their own cost, a shock to the economy is still to be expected, particularly in European countries where inflation continues to increase 5% YoY.
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The future of the economy is uncertain. In times where cash flow is critical to an organization’s survival, we are here to help you navigate your business decisions and protect yourself. Contact us today with any questions about how credit insurance can protect your business.