Russia's invasion of Ukraine on Wednesday implies the conflict will have a greater impact on the US economy than previously thought, as it raises oil prices and inflation while worsening supply chain snarls.
Gregory Daco, the chief economist at EY-Parthenon, estimated a blow to the growth of up to a percentage point in the worst-case scenario of a full-scale conflict. He believes he's leaning toward a more pessimistic forecast, but for now, he's forecasting a 0.6 percentage point effect.
US Faces Worse Economy Amid Russia Attacks in Ukraine
Oxford Economic has changed its base projection for world economic growth to a full-scale invasion scenario. Keep in mind that the United States isn't nearly as sensitive to the crisis as Europe, which receives roughly 30% of its oil from Russia vs around 3% for the United States, according to Tom Kloza, chief global analyst for the Oil Price Information Service.
A conflict, on the other hand, might drastically reduce economic productivity by shattering consumer and company confidence. Reopening firms, solid job growth, rising salaries, and government stimulus money stimulated robust consumer spending and corporate investment in the United States last year, the strongest pace since 1984. Low-income households, on the other hand, have mostly drained their reserves, and the first rush of spending has essentially passed.
Despite the spread of the extremely infectious omicron strain of the coronavirus, businesses added 467,000 jobs in January, and retail sales increased by 3.8 percent. As a result, several analysts have raised their first-quarter GDP projections from below 2% to between 2% and 3%, USA Today reported.
After Russia started a full-fledged invasion of Ukraine, soaring US gas prices are likely to worsen, with some analysts predicting that prices might reach $5 per gallon or more in the coming months.
According to GasBuddy analyst Patrick De Haan, if crude oil prices rise, the national average price of a gallon of gasoline might approach $3.75 in the next two weeks, which could be just "the tip of the iceberg." According to AAA, the current national average is around $3.54.
If Russia reacts to harsh penalties from the US and its allies by restricting oil exports, prices might rise, even more, pushing the global cost per barrel to new highs.
With inflation at a four-decade high, American motorists are already paying exorbitant gas rates. On Thursday, the US benchmark oil index soared to above $100 per barrel as Russia, a major global fuel supplier, disregarded international warnings and pushed soldiers across the border. It has fallen back to slightly over $92 by late afternoon in New York, according to the New York Post.
Read Also : Guns Now the Leading Causes of Deaths by Trauma in the US; Millions of Years of Life Lost to Firearms
President Joe Biden Warns Oil Companies
Meanwhile, President Joe Biden is asking American energy corporations not to profit from Russia's invasion of Ukraine after oil and gas prices soared following Moscow's incursion on Thursday.
Following a meeting with colleagues from the Group of Seven economic giants, President Obama addressed the quickly worsening issue from the White House this afternoon. Concerns about how Putin's invasion will affect the global oil and gas supply chain led to the exclusion of Russian-based energy businesses.
Russia is the world's second-biggest oil exporter, behind Saudi Arabia, and the world's largest natural gas producer. The European Union now imports 40% of its natural gas from Russia. Following the incident, oil prices were momentarily above $100 per barrel for the first time since 2014.
While conceding that damage to Russia's economy would have repercussions for US people's wallets, Biden also advised American businesses from adding to the financial hardship by pursuing profit maximization, as per Daily Mail.
Related Article : Discount Chain Distribution Plant Affected by Severe Rodent Infestation Contaminating Products Sold, FDA Reports
@YouTube
