Gas rationing, food stamps and hunger: the economic pain of Russia’s war is becoming real

New York
CNN Business

As Russian soldiers attack Ukraine, more and more desperate ukrainians they are running out of food and medicine. The economic consequences of the invasion are also beginning to spread to the rest of the world.

Global growth forecasts are being cut and the possibility of a US. recession in 2023 it has risen to 35%, according to Goldman Sachs.

But war in Europe is no longer a theoretical concern of the future for economists to discuss in research papers and notes to investors. It’s tangible. It’s here. And it is causing pain to millions.

Sanctions and other supply chain disruptions have caused consumer prices to rise around the world as oil and other commodity prices soar. Soaring gasoline and diesel prices are also driving up the cost of food, raising fears that the world is in danger. on the verge of a hunger crisis.

France’s government is considering food vouchers to help residents eat. A commodity trading company said diesel is so scarce that it will soon have to be rationed.

Millions of refugees are leaving Ukraine with little ability to pay for their needs. Inside Ukraine, some cities have less than four days’ worth of food, the Mercy Corps aid agency said on Tuesday, warning that the humanitarian system in the country “is completely collapsed.”

At least 70% of the population of Kharkiv and Sumy are completely dependent on aid, estimated Steve Gordon, Mercy Corps humanitarian response adviser in Ukraine.

Food and medical supplies have almost run out in the southern Ukrainian city of Kherson, according to Ukrainian Foreign Ministry spokesman Oleg Nikolenko.

The domino effect of the Russian invasion of Ukraine has pushed up food prices. As gasoline prices rise, the supply of fertilizers shrinks. That has sent prices soaring for wheat, corn, vegetable oils and soybeans, which is especially worrying for countries already struggling with food insecurity.

But developed economies are also starting to feel the pain.

French President Emmanuel Macron has said his government is considering food stamps to help low- and middle-income families eat, calling the problem a “global food crisis.”

“I want to start a food bonus [system] to help the most modest households and the middle class who face these additional costs,” Macron said in an interview with France Bleu radio on Tuesday.

World wheat prices have it shot itself as supplies from Russia and Ukraine have been largely cut off from the rest of the world. Together, the countries export 30% of the world’s wheat. Fertilizer supply is also tight as energy prices rise.

The shock waves have reached even the world’s largest economy. US food prices increased 1% in February, the largest monthly increase since April 2020. Over the past 12 months, overall US food prices increased 7.9%, the largest increase since July 1981.

egypt this week set the price of bread to limit price gouging caused by supply chain disruptions. In the three weeks after the Russian invasion of Ukraine, the price of non-subsidized bread had risen by as much as 25% in some bakeries.

Energy prices have risen around the world as the world has shied away from Russian crude. The country’s oil has been banned by the US, Canada, the UK and Australia, and oil companies in Europe (Shell, Neste, Total) are also phasing it out.

If Europe adopts a full embargothat could force Russia to cut supplies by 3 million barrels a day, putting the world at risk of extreme oil supply shortages unless OPEC nations start rapidly ramping up production, a move they have hesitated in taking

The chief executive of Dutch commodity trading company Vitol said this week that withdrawing Russian oil from the Western market will force drivers and truckers to ration diesel fuel.

“What will worry everyone will be the supply of diesel. Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East,” said Russell Hardy, CEO of Vitol, at the FT Global Commodities Summit in Lausanne, Switzerland on Tuesday. “That systemic diesel deficit is there.”

Meanwhile, the UK government is cutting taxes to help keep fuel affordable. Finance Minister Rishi Sunak said on Wednesday that he would cut taxes on gasoline and diesel for a year. The government will also raise the income threshold for a payroll tax for some 30 million people.

– CNN’s Matt Egan, Alex Hardie, Chris Liakos and Antonia Mortensen contributed to this report.

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