Effect of Inflation

 

Prices were going to start falling as the money from last year’s stimulus checks worked its way through the economy but with the war in Ukraine and sanctions imposed on Russian exports, expect to see them moving up again. Sanctions against Russian mean there are sanctions in place on their international trade against three of the major oil producers in the world:  Russia, Iran, and Venezuela.  The world’s economy has been doing OK with the sanctions against Iran and Venezuela but Europe, last time I checked, gets about 40% of its oil from Russia. The US, currently the number one oil producing nation in the world, has promised to ramp up oil production to help fill the gap left by the expected loss in Russian oil production, although the sanctions may provide exceptions for energy, which makes them much less effective. According to S& P Global Platts, about 75% of the world’s sunflower oil comes from Russia and Ukraine and  just under 25% of its wheat supply comes from the two countries, so disruptions in the supply from both of them will mean further, and longer term, price increases in the food supply. Food is a necessity, games and comics, luxury items. When it comes to how to allocate dollars as prices rise, food will (usually) take priority over entertainment. Although it is doubtful we will see the double digit inflation rates of the late 1970s, the current 7% rate still triples the numbers we have seen over the last 20 odd years and will likely continue for most, if not all of this year.