Published on March 10, 2014
By every hour, the chance of armed conflict in Ukraine is rising with Russian troops seizing Crimea and if this crops up then there would be a possibility of economic costs that could ripple across the global economy and can also cause inflation in gas and oil and also in plane fares in the U.S. According to the news reported, there has been mounting anxiety about the crisis in Ukraine which will be affecting the global economy and the political conflicts have rooted the oil prices to impale.
Amid the fears with sudden rise in the prices of oil and gas, the crisis in Ukraine could have a detrimental effect on of the major supply routes of Europe. However, as per the analyst high European gas stocks will limit the instability and in the early trading gas furthers surge up by 10% whereas the price level of crude oil increased more by 2% to USD 112/ barrel. The usage of crude oil gets condense to make a number of things which is basically used everyday such as home heating oil, diesel fuel, the gasoline which is used in cars etc. It is also used to pave the roads.
Russia is the biggest supplier of natural gas to Europe although for the last decade the continent has been weaning itself off dependence on its neighbour. The first effects of the crisis will affect on the US economy will be nominal and it will have worldwide outcome as well. According to the European Union Statistics, the country imports less than 30% of its natural gas from Russia compare with 45% in 2003. In 2010, nearly 34.5% of oil import of Europe and 31.8% of their natural gas imports were originated in Russia.
In Russia, natural gas and crude oil are both state run industries and if such crisis prolongs to shoot up, the Russian President Vladimir Putin might possibly take any action by the international community by cutting off the exports of oil and natural gas from Russia to the European Union. However, cutting off the exports of natural gas and crude oil to the entire European Union would be an extreme step for Kremlin which relies on revenues from those exports to fund the government. Moreover, in 2012 nearly 84% of oil exported from Russia and 80% of their natural gas were exported and went to European Union. With the closing of the pipelines to most of the European countries will lead to a massive hole in the budget of the country.
The five big financial and economic impacts of the Ukraine crisis which hit the European market is the lower stock prices, higher energy prices particularly in Europe, slower economic growth in Europe due of higher energy prices, lower U.S. Treasury yields and higher gold prices. Before mending at USD 104.63, the level of West Texas Crude shoots up to a five month high of USD 105.22/ barrel, whereas the Brent Crude oil took a leap of nearly 2% to USD 112.39 which is a two month high, before settling at USD 111.20. Moreover, in time of crisis the investors are looking for safety and the US government is not only having a good credit record but an enormous military to defend it.
