The price of Brent crude on Wednesday exceeded $110, its highest price since 2014 as Russia’s invasion of Ukraine raged on and international sanctions against Moscow began to bite.
Fears of a global oil supply crisis following Russia’s military assault on Ukraine prompted Ryanair director Michael O’Leary to urge western nations to ramp up the production of oil at tame soaring prices.
Brent crude on Wednesday was trading at $111.59 on the London futures market, a 6.3% increase on Tuesday figures.
As Russia moves troops into the Donbas region of Ukraine, experts warn that the prospect of a shooting war erupting in Europe, combined with heavy sanctions on Russia, is likely to cause instability in the energy market, possibly translating into significantly higher costs for both gasoline and natural gas.
Because Russia is one of the world’s largest producers of oil and natural gas, disruptions in its output, whether as an unintended consequence of military action or as a response to international sanctions, can have a profound effect on energy prices.
Global oil prices are extremely sensitive to supply disruptions, said Ed Hirs, an energy fellow at the University of Houston.
“Russia exports about four and a half million barrels (of oil) a day, in a global market that’s roughly 100 million barrels a day,” Hirs told VOA. “If a million barrels gets pushed aside, either for the war effort or because sanctions cut off delivery, or there’s a catastrophe with the Russian oil fields as the war progresses … we’d expect to see the oil prices increase by 20% to 25%. That would mean the retail price of gasoline would go up 50 cents to 75 cents a gallon.”
Sanctions levied on Russia
As tensions have increased in Ukraine over the past few months, oil prices, in particular, have responded to widespread uncertainty by rising sharply. On Tuesday, the price of Brent Crude, which is commonly used as a benchmark, was above $96 per barrel, up from under $70 in early December.
On Monday and Tuesday, leaders in the United States and Europe began announcing a list of punitive measures being imposed against Russia. Most of the sanctions targeted banks and wealthy individual Russians, and were not a direct move against Russia’s energy sector.
FILE – Pipes at the landfall facilities of the Nord Stream 2 gas pipline are pictured in Lubmin, northern Germany, Feb. 15, 2022.
The one exception was the announcement by German Chancellor Olaf Scholz that the German government would not allow the controversial Nord Stream 2 pipeline, which would transport natural gas directly from Russia to Germany under the Baltic Sea, to open.
As the pipeline has never been operational, that announcement had no effect on current energy supplies. However, a senior administration official Tuesday hailed the decision to suspend the approval of the pipeline as an important step in breaking Europe’s dependence on Russia for natural gas, and said that the U.S. would continue to ramp up shipments of liquefied natural gas to Europe to compensate for any loss of supply from Russia.
Biden addresses fuel prices
In announcing the U.S. sanctions targeting Russia, President Joe Biden on Tuesday warned that they would have consequences for Americans in the form of higher fuel prices. “Defending freedom will have a cost for us, as well, here at home,” he said. “We need to be honest about that.”
He said that his administration would “take robust action to make sure the pain of our sanctions is targeted at the Russian economy, not ours.” He promised to lead a coordinated effort involving major oil producers that would “blunt” the impact of supply disruptions on fuel prices.
“I want to limit the pain the American people are feeling at the gas pump,” he said. “This is critical to me.”
Markets already stressed
As a result of the coronavirus pandemic, energy markets were already significantly disordered, even before Russia began massing troops on the border of Ukraine last year.
FILE – A section of an oil platform operated by Lukoil company is seen at the Kravtsovskoye oil field in the Baltic Sea, Russia, Sept. 16, 2021.
In the early phases of the pandemic, global demand for oil and gas plummeted as lockdowns kept people from driving and using public transportation. At one point in April 2020, there was such a supply glut that the price of oil plunged into negative territory, meaning that producers were having to pay buyers to take supply off their hands.
One consequence was a major decrease in production, as many high-cost extraction operations became economically unsustainable and were taken offline.
Demand has largely recovered, according to Gregory Upton, an associate research professor at Louisiana State University’s Center for Energy Studies. However, Upton told VOA, oil production remains slightly below pre-pandemic levels, which has added upward pressure on prices.
Markets will compensate
Upton told VOA that if supplies of Russian oil and gas are significantly curtailed as a result of war in Ukraine, that would encourage oil producers to reactivate some of the production facilities that were shut down during the pandemic.
“If sanctions are put on Russian oil and/or natural gas, and that reduces that supply to the global market, that will put upward pressure on prices,” Upton said. “Markets will respond. Upward pressure on prices will incentivize people to go drill more wells … and it will move that market back into equilibrium.”
That doesn’t mean that there will not be disruptions, some potentially significant, in the near term. But, as of Tuesday, Upton said futures markets continued to predict that, in the medium term, oil prices will fall.
BOGOTA COLOMBIA). Tuesday, February 22, 2022 (RPTV NEWS AGENCY). Live cattle exports sent meat prices skyrocketing at rates unprecedented in the history of livestock farming. In one year, the price per kilo registered an increase of 53.8%, going from 24,958 pesos per kilo in December 2020 to an average of 38,409 pesos per kilo in December 2021.
The fact, which seems positive for the livestock sector, is in practice a “double-edged sword” for the competitiveness of livestock production. On the one hand, high prices have generated a drop in the consumption of this food because the purchasing power of the population is not very large. On the other hand, they have caused changes in the meat trade to the detriment of thousands of vendors in the country.
That is why refrigerators and meat dispensers are concerned. The trade of this food registers drops in consumption and the traditional trade system presents changes that harm the activity.
For example, in some regions of the country, the consumer no longer buys meat by the pound or by the kilo. “It got to the point that the consumer buys two thousand or three thousand pesos of meat, so that they reach those little pesos” explain merchants of this food.
But why did this situation come about? The answer lies in exports of live animals, which have become the main cause for meat prices to increase disproportionately. Records of sales abroad indicate that the trade of animals abroad increased 250%, going from 75,370 heads of cattle exported in 2019 to 264,107 head of cattle sent abroad in 2020. However, and despite the fact that this activity presented a slight decrease in 6.4% between 2020 and 2021, the export trend tends to rise with great supply threats for the country.For example, in January this year, they exported 15,600 livestock to Lebanon and Egypt. Last weekend, 10,000 more copies were dispatched and another shipment of 10,000 copies is expected for February 15.
Undoubtedly, exports of live cattle marked unexpected increases in the price of meat and will continue if the government does not adopt measures to regulate this market, says the Executive President of the Colombian Meat Processing Association (Asofricol), Álvaro Urrea.
“The government has been insistently asked to issue regulations aimed at regulating live cattle exports, but it has ignored it,” explains Urrea, claiming the urgent need to have clear regulations so that animals for export meet weight requirements.
It is essential to adopt several measures so that meat prices stop their upward trend and the livestock sector is not harmed. One, urgently start a bovine repopulation program. Two, create norms that regulate live cattle exports, especially in relation to the weight of the animals.
ANIMAL PRICES
According to data supplied by the National Administrative Department of Statistics (DANE), the price of the fat steer registered considerable increases in the last three years. For example, from 2018 to 2019, prices grew 0.66%, in the period from 2019 to 2020, prices increased 14.12% and in the period from 2020 to 2021, prices increased by 39.62%.
FAT STEER PRICE
($ x kilo – average for each year)
YEARPESOS
2018 4,243
2019 4,271 (Increased 0.66% compared to 2018)
2020 4,874 (Increase 14.12% in relation to 2019)
2021 6,805 (Increased 39.62% in relation to 2020)
MEAT PRICES
According to reports from the National Administrative Department of Statistics (DANE), meat prices showed increases of 4.21 in the period from 2019 to 2020 and 53.8% in force from 2020 to 2021.
MEAT PRICE PER KILO
YEARPRICE IN PESOS
DEC. 2019 23,950
DEC. 2020 24,958 (Increased 4.21% compared to 2019)
DEC. 2021 38,409 (Increased 53.8% compared to 2020)
ANIMAL EXPORTS
The National Administrative Department of Statistics (DANE), reveals that the trade of live animals for export presented a vertiginous jump between the period 2019 and 2020. Sales grew by 250%, going from 75,370 animals exported in 2019 to 264,107 animals exported in 2020 .
In 2021, sales of live animals abroad totaled 247,171 animals, registering a slight decrease compared to exports in 2020.
YEARQUANTITY OF ANIMALS
2018 54,595
2019 75,370 (Increased 38% compared to 2018)
2020 264,107 (Increased 250% compared to 2019)
2021 247,171 (Decreased 6.4% in relation to 2020)
According to Urrea, this growth in live animal exports has caused a substantial drop in the country’s livestock stocks, which means that the demand is much greater than the supply.
It is imperative that the government regulate live cattle exports, given that the country may experience shortages of meat with enormous consequences for the price and purchasing power of Colombians, calls for the Asofricol.
High prices have prevailed for several months in the family basket of the capital of Valle del Cauca.
Basic products such as potatoes, meat, rice, grains, fruits and others have been under the movement of high values.
Now there is a drop in costs, although that depends on the movement of cargo and other factors such as the weather.
(Read in context: The family basket in Cali is still ‘through the roof’)
From the sectors that transport, distribute or market, higher costs have been argued in the production and distribution of food.
ANDhe executive president of the National Federation of Merchants (Fenalco), in Valle del Cauca, Octavio Quintero, notes that 70 percent of the food that makes up the family basket in Valle del Cauca is imported, especially from other departments.
There is also food and supplies that arrive from other countries.For the price and market information coordinator of the Valle del Cauca Supply Center (Cavasa), Oliver Medina, the one in Cali is the highest family basket in recent years.
Merchant Edgar López, spokesperson at Santa Elena gallery
Edgar López, spokesman for the merchants in the Santa Elena gallery, there is a respite in the price of some of the basic foods.
As an example, on Saturday, market day, a product such as brown potatoes lowered its price because the 50-kilo package was 170,000 pesos, but it is available for 130,000.
Thus, tomato, banana and watermelon, among others, have lowered their price in the main food pantry of Caleños, which is the Santa Elena market square.
López points out that it is important to take into account that there are serious risks in food security, products such as beef and potatoes have increased their price above the adjustment in the minimum wage for 2022.
With great concern I see how the prices of the family basket are rising in Cali, the argument of the man from the store: “with the closure of the tunnel of the line, the consumption of gasoline and freight increased, will it be only Cali? The argument will be valid or usury.
— Father Orphan Senate #19 Citizen Force (@PadreHuerfano1) January 21, 2021
The merchant invited “the citizens of Cali to buy the Santa Elena gallery in the largest food pantry, associating with their neighbors, friends and family so that they can make their purchases in bulk and thus obtain a better price, with this you help the merchant that has seen its sales reduced by 30 percent due to the loss in the purchasing power of the people of Cali and the peasant who produces what we eat”.
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The Secretary of District Education of Cartagena (SED) reported that the deliveries of industrialized rations to students benefiting from the School Feeding Program (PAE) have been affected since last Tuesday by defaults by operators.
Today there are 106,000 students in 205 schools without receiving food rations.
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The contract is backed by the Mercantile Exchange
This contract involves the Mercantile Exchange, who will have to act in the company of the Cartagena district in verifying the causes mentioned by the operators,
According to the District, the operators Cartagena Express and Por los Niños de la Heroica requested last February 14 to suspend deliveries from Tuesday, February 15 until next Monday, citing non-compliance by their suppliers and effects that they say they have due to the impact of high food prices in the country.
The District Secretary of Education rejected the late notice of the operators and recalled that the arguments expressed do not exempt them from the administrative and contractual decisions applied by the District within the framework of the current contracts.
(Also: Explosive device leaves several injured in El Tambo, Cauca)
Even so, the operator suspended the school feeding service between February 16, 17, 18 and 21, 2022.
“This contract involves the Mercantile Exchange, who will have to act in the company of the Cartagena district in verifying the causes mentioned by the operators, and if it is true that all the alternatives were supplied, and if not, they must be sought as soon as possible, all alternatives must be looked at for the reestablishment of this right to education”, assured Juan Carlos Martínez, director of Food to Learn.
District promises legal action
There is no justification for it being due to non-compliance with prices by suppliers. This is not an issue that has occurred from one day to the next, and nobody forces the operator to have the same provider.
The legal team of the Ministry of Education reported that it is analyzing the situation to provide a timely response and take the legal actions that must be applied to the operators within the framework of the contracts for the provision of school meals.
“There is no justification for it being due to non-compliance with prices by suppliers. This is not an issue that has occurred from one day to the next, and nobody forces the operator to have the same provider. It is working all over the country. We cannot unilaterally be causing problems for children, a contract is not resolved in that way,” said Martínez.
The District asked the Ombudsman and other surveillance and control entities to be permanently integrated into the daily tasks of PAE supervision carried out by the Secretary of Education since the beginning of the school calendar, in the company of the School Feeding Committees, made up of teachers and parents.
Cartagena
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U.S. consumer prices surged at an annual pace of 7.5% in January, the fastest increase in four decades, the Labor Department reported Thursday.
Americans are facing higher costs for autos, household furniture and appliances, according to the government. While some of those purchases can be delayed, U.S. household budgets are being squeezed by something everyone needs — food — with consumers facing higher prices for meat, eggs, citrus fruit and now produce as well. Gasoline prices for motorists also remain high in the U.S.
The inflationary surge is being fueled by coronavirus-related supply-and-demand issues.
Consumers seem willing to buy goods after the coronavirus curbed personal spending, but now manufacturers have been unable in some cases to make enough of their products and at the same time face a shortage of shippers and truckers to get their goods into stores and showrooms.
“The price pressures on households just don’t end,” Greg McBride, the chief financial analyst at Bankrate.com, said in a statement. “Not only have home prices jumped 20% in the past year, but now many rents are too, rising 0.5% in the past month alone. Nothing squeezes household budgets more than the outsized increases we’re currently seeing on costs for shelter and housing.”
The U.S. economy is sharply increasing, recovering from the pandemic at a faster pace than economists once projected, advancing by 5.7% in 2021, the fastest full-year gain since 1984.
The U.S., with the world’s biggest economy, added 467,000 more jobs in January, while its unemployment rate ticked up to 4% as more unemployed people looked for work. Businesses added a record 6.4 million jobs last year.
FILE – A hiring sign is shown at a booth for Jameson’s Irish Pub during a job fair on Sept. 22, 2021, in the West Hollywood section of Los Angeles.
The inflation reading for January included a once-a-year revision that affects seasonally adjusted data for the past five years, with the Labor Department also updating the list of goods included in the calculation, to reflect consumer buying habits in recent years.
Economists are predicting that, over time, inflationary pressures will ease. But policymakers at the Federal Reserve, the country’s central bank, are signaling they will start increasing their benchmark interest next month to tamp down inflation and keep the U.S. economy from overheating. The Fed normally tries to set policies allowing for a 2% annual inflation rate, far less than the current jump in prices.
An increase in the Fed’s key interest rate will likely, over time, boost borrowing costs for consumers and businesses as well, helping to keep inflation in check.
New claims for jobless benefits fell in the United States last week, the Labor Department also reported Thursday, as many employers hung on to the workers they have and searched for more.
The agency said 223,000 unemployed workers filed for compensation, down 16,000 from the revised figure of the week before. The new total was in line with the claim figures from recent weeks as the U.S. economy continues to recover from the havoc inflicted on it by the advance of the coronavirus pandemic that swept into the country nearly two years ago.
Many employers are looking for more workers, despite about 6.5 million workers remaining unemployed in the U.S.
At the end of December, there were 10.9 million job openings in the U.S., but the skills of available workers often do not match what employers want, or the job openings are not where the unemployed live. In addition, many of the available jobs are low-wage service positions that the jobless shun.
