the price of raw materials is skyrocketing like never before since 1970

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“It’s crazy. We were counting on prices going down now, but with the war they’ve skyrocketed.” The diesel company employee shrugs his shoulders and pulls out the dataphone. He has just filled the tank of my house – on which I depend, among other things, to heat the water or start the heating – with 500 liters. The bill: 630 euros. On January 7, when we saw each other for the last time, I had filled the same tank to the brim with 604 liters and the bill had remained at 543 euros. Even then it was expensive, but now… “The war. And luckily you’re asking now; Monday may be worse,” he tells me while the dataphone spits out my receipt, he starts his truck and I’m left with the doubt of if I should laugh or give him a hug.

The war, yes.

War.

The war that is felt in the wallet

Russia’s offensive in Ukraine, at the other end of Europe, has not only revived the fear of a nuclear catastrophe and captured the attention of the media and multinationals from half the globe. His mark is felt, and strongly, in the portfolio. Raw materials, energy and fuels are experiencing an increase that, at the end of the chain, translates into circumstances like the one that this writer has had to live with: fuel tanks with less load and more expensive than two months ago.

One of the curves that has felt it the most, as my card has just experienced, is the fuel curve. Not everything is attributable to war, of course. The rise in demand generated by the recovery in demand after the pandemic also has an influence. What is undeniable, however, is that in recent days there has been a more than remarkable escalation. Brent’s barrel reached $118.19 yesterday, far from the 98.57 of a week ago. The data of latest Petroleum Bulletin of the European Union, published just a few days ago, on Thursday, set a sales measure in Spain of 1,608 euros per liter of gasoline; diesel, in turn, was around 1,496.

The Ukraine conflict is going to claim two unexpected victims: fertilizers and wheat

How exactly does the war affect prices? Russia is one of the world’s largest oil exporters, along with the US and Saudi Arabia. According to data collected by The Conversationproduces about 11 million barrels of crude oil per day, more or less of which is used for internal demand that has presumably increased due to the need for military fuel.

Much of the exported oil ends up going to Europe. With these figures, it is better understood than any geopolitical scenario that affects it affects the market. “If it were an open conflict, we would be talking about an event for the energy market as important as the first two oil crises”, experts pointed out before the conflict. Firms like British Petroleum and Shell have canceled their investments in Russia and the US oil giant Exxon Mobil too has already announced that it will abandon its operations in the country.

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The rise in prices in the sector, in any case, cannot be attributed exclusively to the war in Ukraine. In fact, 2021 has already closed with a notable increase, of more than 50%, compared to the previous year. There are other factors at play.like the Organization of Petroleum Exporting Countries (OPEC) choke the offergeopolitical tensions in the Middle East, taxes and the increase in demand itself that has accompanied the gradual exit from the pandemic.

The natural gas curve has also made the effect of the war felt. On Wednesday, as the conflict intensified and Moscow stepped up its offensive against Kiev, its price shot up more than 30% in Europe. At the worst moment of the day, its rise exceeded 50% and was close to 200 euros per megawatt hour, which leaves the record reached in December far behind. Beyond the figures, the consequences will also be felt significantly in the portfolio.

Electricity in the wholesale market will today reach €366.55 per megawatt hour (MWh), which represents its highest price in 2022 and the second highest since there are records. The data from the Iberian Market Operator (OMIE) also contemplate an upward trend and that the price will be 7.58% higher than today’s tomorrow. Usually, electricity will be 78.28% more expensive than just over a week ago, when Kremlin troops advanced into Ukraine.

Rise of energy… and what is not energy

Price spikes are not fueled by energy alone. also the raw materialssuch as aluminum, coal or even wheat are registering considerable increases and are on the way to historical increases. various media international They collected days ago how the S&P GSCI index, a fundamental indicator for commodity markets, accumulated a weekly increase of 16% and pointed to the steepest rise in its records, which date back to 1970.

The wheat, in maxima, set a good example. Before the war, Russia and Ukraine – the “granary” of Europe – generated about a third of world grain exports. Fearing that the conflict will create a supply shortage in just a week its price has shot up 40% in the reference market of the USA, reaching the value of 12 dollars per bushel, about 27 kilos. You have to go back to the 2008 financial crisis to find similar values. Wheat futures contracts, in fact, increased by 58.41% in one month.

It is not the only food that sees its prices draw upward curves. The rise in inflation and the effect of the war in Ukraine is also felt in corn, with increases of 28% so far this year in the US market, the largest in the world; or more than 13% in sunflower oil, a commodity that is in the country of Volodymyr Zelensky a key pillar.

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According to data collected in 2019 by the Observatory of Economic Complexity (OEC), the former Soviet satellite is the world’s largest producer of sunflower oil and brings together almost 20% of world exports of the resource. Ukraine is also the granary of Europe and Spain: About 30% of the corn it needs annually, 17% of the wheat, 60% of sunflower oil and 15% of legumes comes from purchases from that country. The consumer association Asedas assures in fact that there are supermarkets that have already begun to limit the marketing of this type of vegetable fat after detecting a massive gathering of customers fearful of shortages.

Others raw materials on the rise are nickel, aluminum and Coal, a substitute for gas and crude oil in the generation of electricity. Both have equally reached highs. In Asia, its benchmark index hit a record $440 per tonne this week; and in Europe 435 dollars were recorded, values ​​that exceeded those recorded just 24 hours before.

The worst energy crisis since 1973: the invasion of Ukraine has triggered gas by 55% and rising

“They are off the charts. It means that people are really desperate for fast delivery,” explains James Stevenson, analyst at Oil Price Information Service, to E&E News. The key is again in the weight of the powers in the fight. Russia is the world’s third largest exporter of coal for power generation and in 2020 a third of its shipments went to Europe.

The situation is similar in the case of aluminum, which is also moving at record values ​​and is found in Russia one of its great producers on a world scale, behind China and India and that distributes its exports among countries distributed, for example, in Asia, America and the EU. One of the handicaps that it faces in times of war are the difficulties of transportation.

Large shipping companies, such as MSC, Maersk, Hapag Lloyd or ONE have already announced their decision to suspend services to Russia as international sanctions increased. Maersk, for example, pointed to tuesday how it will solely maintain service to and from Russia for food, medical and humanitarian supplies. The latest Insider data indicates that, after a notable climb, aluminum is now at 3,849.00 dollars per ton.

“It’s war,” says the diesel delivery man.

Image | Artyom Korshunov (Unsplash) and Anton Romko

“It’s crazy. We were counting on prices going down now, but with the war they’ve skyrocketed.” The diesel company employee…

“It’s crazy. We were counting on prices going down now, but with the war they’ve skyrocketed.” The diesel company employee…

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