By Matt Whittaker / NewsBreak Denver
(Across Colorado) Russia’s invasion of Ukraine stoked fears of disruptions in the global oil, natural gas and wheat markets, raising prices for those commodities and increasing the likelihood that Coloradans will pay more for energy and food when inflation is already high.
Despite President Joe Biden saying Thursday sanctions won't disrupt international oil and natural gas markets, there are worries that Russia – which is the world's third-largest oil producer and second-biggest natural gas producer – could cut its energy exports to Europe as a diplomatic cudgel in retaliation for sanctions. That disruption in global supply would raise prices globally.
"Energy prices will go up everywhere, no question about it," said John O’Loughlin, political geographer at the University of Colorado who studies conflict and Ukrainian geopolitics.
Oil, natural gas, wheat prices already rising
Even though that disruption hasn't happened yet, uncertainty sent market prices for those commodities sharply higher. On Thursday, the international crude oil benchmark rose above $100 per barrel for the first time since 2014, and the U.S. crude benchmark was near its highest point since that time.
Meanwhile, U.S. natural gas prices rose as much as 6.9% to touch their highest level since Feb. 4 before pulling back. European natural gas prices are much higher, and U.S. companies have been exporting liquified natural gas to sell it into the higher-priced market.
The gains come as Coloradans already feel the pinch from inflation growing faster than the national average. The consumer price index for Denver, Aurora and Lakewood rose 7.9 percent in the year through January, higher than the 7.5 percent national number. Over that time, local food prices rose 7.3 percent, household energy costs jumped 8.4 percent and gasoline rose a whopping 38.4 percent.
A rebound in economic activity amid recovery from the pandemic helped boost natural gas and oil prices.
Russia and Ukraine are also major wheat producers, and the conflict helped U.S. wheat futures reach their highest point since 2012.
Consumers will probably feel gas price increase first
Its highly likely that the Ukraine-Russia conflict will raise gasoline and natural gas prices, costs for electricity produced from natural gas, and food costs in Colorado, said Mac Clouse, a finance professor at the University of Denver.
The gasoline price will go up "pretty quickly," while consumers likely won't notice effects from higher natural gas prices until they get their next bill, Clouse said.
Any effect on actual wheat supplies won't be as immediate because most of the grain in Russia and Ukraine is harvested over the summer. So elevated wheat prices and the trickle-through effects for food companies and consumers would likely depend on how long the conflict lasts.
It could be a drawn-out affair with huge casualties and more than a million refugees flooding into other parts of Europe, O’Loughlin said.