These days, we cannot help but notice that compared to previous years, finances seem to be direr. The pandemic caused people to tap into their savings, and the war in Ukraine is causing even more financial strain. We are all feeling the effects of rising inflation and prices – let’s just say, it doesn’t feel too good.
Where are we right now, and how have recent events affected our finances?
Can we keep up with today’s prices or is everything going to get even worse?
We cannot say for certain how things are going to change in the future, but what we can say about the present is that reality bites.
Energy Surge and Fuel Prices
Perhaps one of the greatest economic shocks is the increase in fuel prices. Over the past two years, oil and fuel prices have nearly doubled in price, commodities that are heavily influenced by the war between Russia and Ukraine.
Russia produces around 10% of global oil, as well as one-third of the gas delivered to European countries. However, while relatively dependent on Russian gas, the conflict in Ukraine caused the EU to think about cutting gas imports by two-thirds. Britain also announced that they will phase out Russian oil by the time 2022 turns a corner, while U.S. President Joe Biden announced the banning of energy imports from Russia.
The news has caused global citizens to panic-buy high amounts of gas, forming never-ending car lines at fuel stations all over the world. This global action caused even more shortages, especially along the Colonial Pipeline Route, as gas reserves at the station were depleted.
With all the shortages caused by recent events, the world has gone through soaring inflation. When consumers go grocery shopping, they notice that the price for their regular basket is now nearly double the amount they used to pay in the past. At the same time, income levels do not seem to change much if at all, which can significantly affect living standards of many people.
A prime example is Sri Lanka, for instance, currently going through arguably its worst economic disaster. People are having trouble with fuel and other products on the market. There are empty newspaper stalls, simply because there isn’t enough paper to print them. Restaurants and food vendors are going down because they cannot find the ingredients they need for their products.
While Australia saw 3.5% inflation in March, Sri Lanka hit 18.7%. The country is now facing huge debt, caused by tax cuts, years of government loans, COVID-19 restrictions, and now, the trickle-down global economics from the war in Ukraine.
Many of the global supply chains have already been affected by China’s Covid-19 pandemic. Due to lockdowns, commerce was heavily restricted, causing business owners to lose more money than ever. With even more international supply chains being interrupted by the war, global prices soared drastically, causing global economic fallout.
Stock Market Volatility
The stock market also saw quite a number of changes ever since the pandemic started. In the first few months of 2020, panic started among stockholders, causing them to sell stocks rapidly, but no one was buying. This led to the stock market crash of 2020, with stocks dropping by 12% in just one day. The stock market quickly recovered, the crash lasting only a few months.
Experts also warn that a recurrence may happen in 2022. Since the war in Ukraine began, imports and exports have been troublesome, with tensions growing throughout the entire world. In the first few months of 2022, stock benchmarks dropped by 4.6%, with finance specialists predicting that we are nearing a recession scenario.
Soaring Wheat, Grain, and Metal Prices
Wheat and grain have also begun soaring in prices. Russia and Ukraine accounted for around 30% of globally traded wheat, and while there are existing reserves from previous shipments, the future remains boldly uncertain. With crops having been destroyed in Ukraine and production coming to a halt, along with imports banned from Russia, the world’s wheat reserve is becoming narrower by the day.
This has caused the price of wheat and wheat-based products to rise. With people panic-buying products all over the Middle East and the World, the prices are soaring even more as supply depletes. The Russian invasion has made it difficult for global supplies to be replenished, raising concerns for what may be about to transpire.
Metal prices have also jumped, especially amidst the Ukraine and Russia war. Metals and minerals increased by nearly 50% in 2021, some even more than others. This has caused a variety of consumer goods to skyrocket in price, from construction and electronics to everyday cookware.
Where to From Here?
Considering everything that we’ve been forced to deal with these last couple of years, it’s not unusual for people to think that we are nearing a global recession. However, many finance specialists have assured that we have not reached that stage yet. The global situation is looking uncertain as Europe’s war unfolds as of now and into the near future.
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