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What Russia's invasion on Ukraine could mean for the local economy

Gas pump
Posted at 5:11 PM, Feb 24, 2022

The Russian invasion of Ukraine is already having an impact on local goods. Experts expect prices to keep rising as this political and economic disruption plays out.

Conflict is disrupting the oil and gas market. Locally, we've seen a steady rise in gas prices with prices at some San Luis Obispo gas stations already over $5 for a gallon of regular gas.

Explosions and striking images of people sheltering in subway stations in Ukraine and the U.S. is taking a stand against Russia all in one day.

"We've now sanctioned Russian banks that together hold around one trillion dollars in assets,” President Joe Biden said Thursday.

They’re measures that will impact the Kremlin.

“That's the point of the sanctions, to try to cut off the supply of money to fund any of these activities,” said Susan Kline, Cuesta College economics professor at Cuesta College.

They’ll also impact the European Union and the U.S.

“Russia produces 10 percent of the world's oil but it also produces a large portion of natural gas and Europe, the European Union countries are very dependent,” said U.C. Santa Barbara political science professor Benjamin Cohen, adding that we’ve already seen markets drop very sharply.

Gas prices have already taken a hit.

“Oil and gas markets are upset, disturbed by these events. prices will go up considerably,” Cohen said.

According to AAA, in California, the average price of a gallon of gas is $4.77, which is 5 cents more than last week. In San Luis Obispo, gas is above the state average at $4.96 on average.

One driver is among many people concerned about rising prices at the pump.

“I switched to driving my Honda a lot more instead of my diesel truck,” said Mike Tracy. However, Gerardo Martinez says it won’t keep him from driving. “Whatever it is, I'm going to be paying for it and I fill it up.”

But it could be more than that.

“Russia and Ukraine between them account for 25% of the world's export of wheat. There are certain key commodities that Russia exports such as that are needed for technology products such as palladium,” Cohen said.

Economists are concerned that the Russian invasion could be used to profit corporations.

“There's not too much in the grocery store that would be impacted,” Kline said. “However, we are already seeing that a lot of firms are using inflation as an excuse to raise prices.”

It’s an issue being addressed by the Biden administration.

"We're taking active steps to bring down the cost and American oil and gas companies should, should not, should not exploit this moment to hike their prices to raise profits,” the president said on Thursday.

Economists say the best thing consumers can do is to stay away from panic buying because that could also trigger higher prices.

AAA says the states with the largest increase in gas prices in the last week are Ohio, North and South Carolina and California.