Russia-Ukraine War and Its Impact on Global Oil and Food Prices

Abstract

Due to the war between Russia and Ukraine, oil and gas prices and food prices have risen worldwide. This disruption has affected the distribution and production of trade commodities for which Ukraine and Russia are key players. Among the reasons for the price increase were oil and food items, such as wheat, oilseeds, and gas. Due to this, people who are low-income survivors have a hard time surviving. In response, policymakers provided relief for these people with subsidies or lowered taxes. However, these short-run subsidies are inadequate and ineffective remedies that will lead to a shortage of supplies. Through targeted measures, such as cash transfers, policymakers can reduce the impact of these higher prices on lower-income households. Historically, commodity price shocks have induced policy and market responses that led to a larger supply of resources and, in the case of oil price shocks, greater efficiency in consumption and substitution away from oil. Likely, the recent price spike will once again spur more efficient energy consumption and a faster transition away from fossil fuels, especially if policy responses are supportive. We collected data from different sources, including the World Bank, the IMF, and the International Energy Agency, and reports from British Petroleum and the European Commission. The trends show that besides the rise in energy prices, prices of food items are also increasing, and this trend is making people's lives very hard. These price hikes will have the most significant impact on low-income countries, and this will also lead to food shortages worldwide. Changes in relative prices will also affect global food production. As a result of the war, however, there are many uncertainties related to food supply availability, and low-income countries may have a prolonged need for international assistance due to the war.