Russia-Ukraine Border Crisis: The Oil Equation

All over mainstream media, we are hearing about the possibility of Russia invading Ukraine. As a result, we have experienced an intense diplomatic buzzing couple with maximum pressure “Political strategy” on Russia. All to avoid war or to punish Russia should they decide to invade Ukraine. Indeed, if a war were to happen the consequences will be catastrophic for the entire world. I mean we are already facing supply chain challenges; COVID-19 and its related variants are not gone yet, and we are dealing with a record level of high inflation.

 But what if, we got this wrong.

Russia-Ukraine end game

What if the real strategy from Russia and Putin was to create a catalyst to propel oil and commodity prices higher. In fact, as a major oil, gas, and commodity exporter, Russia knows that a major geopolitical crisis during winter would inevitably create panic and send shockwaves across commodity markets.

After all, there is a reason why this is happening in winter when energy consumption is higher. Already we are seeing the result with Brent crude oil price already flirting with $100 a barrel. This translates to higher gas prices at the pump with a ripple effect on everything else. If gas is expensive, transportation costs will go up and the price of everything will go up as well. Thus, penalizing the average American consumer. On the other side, Russia stands to benefit billion from oil and gas revenues.

Pressure on Inflation

California would soon hit $5 a gallon, while Hawaii has already recorded $4.49 a gallon, Washington, Oregon, and Nevada, where prices are in the $3.90s. The situation is adding extra financial pressure on American families. Moreover, Russia effectively invade Ukraine things would get worse.

Yet, the fear of skyrocketing gas prices and the impact on goods and services is the reason why Russia has an upper hand. However, it shouldn’t deter us from doing whatever is in our power to avoid war.

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