As the Russian invasion of Ukraine enters its 13th day, fears are growing about the potential impact of the conflict on global prices of food and energy.
Following talks on Monday around Western and European countries banning Russian oil, fuel prices soared on world markets. On UK forecourts, petrol hit another record average high of 155p per litre, with some expecting it to reach 170p before the end of the year.
As discussions around potential oil embargos on Russia evolve, Deputy Prime Minister of Russia Alexander Novak threatened to close off its main gas pipeline to Germany (Nord Stream One) should such a ban be introduced. He warned that: “a rejection of Russian oil would lead to catastrophic consequences for the global market”, with some fearing that it could cause oil prices to more than double, to $300 per barrel.
The EU gets roughly 40% of its gas and 30% of its oil from Russia and would find it very difficult to replace these supplies even over the course of a year, let alone immediately. It is for this reason that Germany and the Netherlands have rejected calls to ban Russian oil imports to the EU. The UK only gets approximately 5% of its gas from Russia, so would be less directly affected, however the knock on effects of price rises on the global markets would be significant as European demand intensified.
The head of the World Food Programme, David Beasley has also warned that the conflict in Ukraine has the potential to send global food prices soaring with a particularly harsh impact on the world’s poorest.
The war has already damaged levels of food production in both Ukraine and Russia, both of whom are major exporters of foodstuffs. Between them, the two countries account for roughly 25% of the world’s wheat and half of the world’s sunflower products.
Concerns were also expressed this week about access to Russia’s huge supply of fertiliser ingredients including potash and phosphate. Svein Tore Holsether the head of Yara, a fertiliser company which operates in over 60 countries said that “half the world’s population gets food as a result of fertilisers… and if that’s removed from the field for some crops, [the yield] will drop by 50%.”
The number of people at risk of starvation globally has risen from 80 million to 276 million in the four years prior to Russia’s invasion, however there are now further worries about what this number will be by the end of 2022.