On Thursday, February 24, oil was worth $102 a barrel. The price of raw materials has also soared, following the invasion of Ukraine by Russia.
When the Ukraine goes up in flames, the world markets go up in flames, prices soar in a few hours: +6% for wheat, +8% for oil, and even +47% for gas.
What are the consequences?
First of all, bad news for fuel. Russia is the world’s third largest oil producer and accounts for 12% of French consumption. The war is worrying the markets, so a new increase at the pump is expected.
In Germany, the largest consumer of Russian gas, the two-year inflation-adjusted yield – which excludes expected inflation – has fallen 60 basis points since the beginning of last week and implies an inflation rate of up to 3.7 percent, up from 2.4 percent in early February.
The increase is even more significant for gas, as Russia is Europe’s leading supplier, accounting for 46% of our consumption. Worse, Russian gas passes in part through Ukraine, via pipelines that could be damaged by a major war.
It is difficult to find another supplier in the short term. The government has promised to maintain the gas rate shield if necessary. The surge in energy prices, combined with the price of wheat and aluminum, is likely to further increase inflation, which could exceed 4 percent, according to several economists.
Before the war in Ukraine, the Bank of England predicted that inflation would reach a 30-year high of about 7.25% in April, when the 54% increase in household energy bills takes effect.
Yields on one-year UK inflation-linked bonds – or linkers as they are known – have fallen 80 basis points since the beginning of last week, reaching a record low of less than -7% and implying at one point an inflation rate of more than 9%.
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