The supply chain is still looking for the resiliency it enjoyed before the COVID pandemic, coping with things like delivery delays, higher input costs, and supply shortages. But a prolonged war in Ukraine and the accompanying geopolitical risk, threatens even more challenges.
The most immediate risk in all this uncertainty is the cost of oil, which would impact transportation and drive up the cost of most other goods and services. Last week, The Wall Street Journal reported, oil prices climbed to $100 a barrel for the first time in nearly a decade.
In addition, Russia and Ukraine are top suppliers of the world’s wheat exports. Wheat futures prices climbed this week to their highest level since 2008, per CNBC. Russia is the largest exporter of wheat owning 17% of the international wheat trade, Ukraine just behind at 12%.
With a breakdown of supply, the cost of products that incorporate wheat will go even higher in the short term. For businesses that rely on these products, the higher costs could be especially painful across the board.
Metals are also under siege. Prices for aluminum are up more than 20% this year. Palladium — used in the manufacture of fuel cells, catalytic converters, electronics equipment like cell phones and mobile computers, and whose market is Russia-dominated — is showing a jump of 26% since last year.
Also in play are fears of economic warfare. Many economists are watching the ruble in comparison to dollars and other global currencies this week, after major Western countries (the U.S., the EU, Canada, and the UK) agreed to punish Russia for its actions by pulling the plug on “selected” Russian banks from SWIFT (Society for Worldwide Interbank Financial Telecommunication).
A massive decline in the ruble’s value would severely impact the average Russian’s standard of living, as imported goods or commodities to Russia will become much more expensive.