How Russian invasion of Ukraine is upending the commodity markets
The oil price shock couldn’t have come at a worse time for the global economy, which was already reeling under high inflation. Brent crude, a global benchmark, was trading at around $114 a barrel on March 3, after hitting a 10-year high the day before.
The United States, Canada, and the European Union member countries have slapped financial sanctions on Russian banks and companies. Buyers are so concerned that they are not willing to trade in Russian oil even when it’s offered at a steep discount,This doesn't bode well for central bankers who have tried to tame high inflation in many developing and developed economies. High inflation has already become a global problem, according to the World Bank.
As a share of the global market, Russia accounts for five percent of the oil supply. This might appear small, but in a tight market, every barrel of oil counts and any disruption can have a pronounced impact on the price of oil. But such a move does not work in favour of either the United States or the EU as it will drive the price even higher and end up hurting their own populations. Inflation in the US is already at a 40-year high.
Even though the US liquified natural gas companies have increased supply to the EU market in recent months, it’s nowhere close to replacing Russian gas.
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