Russia's war in Ukraine has driven up gas prices. Will rising oil costs increase food prices next?

As Americans continue to experience gas prices quickly spiking, wondering how high they will go, another question has surfaced: Could other things we buy start to cost more, too?   

Experts say it’s unlikely that rising oil prices and the war in Ukraine will cause price increases on the majority of goods Americans buy – yet.

But a prolonged conflict, and a longer period of elevated oil prices, could lead to increased prices for consumer products down the road, economic experts told USA TODAY.

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Inflation was already the highest it’s been in decades before Russia’s invasion of Ukraine. Over the 12 months from January 2021 to January 2022, the Consumer Price Index for all products rose 7.5%, the largest 12-month increase since February 1982.

So the main impact of the war in Ukraine and rising oil prices may be that the expected decline in inflation doesn't come, said Andrew Hunter, Senior US Economist for Capital Economics in a blog post last week.

“The direct impact of the conflict on the US economy is still likely to be negligible,” Hunter said. “The conflict may drive renewed disruptions to some global supply chains.”

But he said the U.S. will feel less impact than Europe because we import fewer products from Russia. Britain's inflation rate is lower than in the U.S, currently about 5.5% over last year. But it's now expected to rise rapidly, according to the BBC, possibly to 10%. 

The February Consumer Price Index will be released on March 10 by the Bureau of Labor Statistics, which may start to give a better picture of price changes since the invasion of Ukraine. 

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Food prices could rise

Besides the gas station, where the impact of $4 per gallon gas has been immediately noticeable, the other place consumers could see price increases in the short term is at the grocery store.

Russia and Ukraine combined account for 25% of global wheat exports and the invasion has sent wheat prices soaring to historic highs. Ukraine recently announced it was banning exports of wheat, oat and other food staples. 

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“In the U.S., we're not necessarily importing from there,” said Kayla Bruun, an economic analyst at Morning Consult. “But because wheat prices are kind of a global price the fact that there's a shortage in Europe or supplies disrupted in Europe would impact the price worldwide and impact consumers in the U.S. as well.”

The price of pasta, bread, cereal and other wheat products could go up for U.S. consumers in the near future, and as the loss of a planting or harvesting season in Ukraine and Russia is felt down the road.

Corn, barley and sunflowers – key crops in Ukraine – are planted in the spring, as early as March. While most of the country's wheat is planted before winter, it would typically be getting fertilized in the spring, according to "The Western Producer." 

Manufacturers will feel price increases and may pass cost to consumers

For other consumer products, any impacts of high oil prices won’t be immediate, Bruun said.

There used to be a stronger correlation between crude oil prices and the consumer price index, a key measure of inflation. But in recent decades, research has shown that correlation becoming weaker while oil prices are still strongly tied to the producer price index, which measures the price of goods at the wholesale level.

“This strong link likely comes from the importance of oil as an input in the production of goods,” according to the Federal Reserve Bank of St. Louis.

Manufacturers will feel the pinch first – whether because they make things like plastics that use petroleum as a raw material – or because it costs more to transport their goods to retailers.

Bruun said about half the cost for running a cargo ship is the fuel to get across the ocean.

Patrick De Haan, head of petroleum analysis for GasBuddy tweeted Tuesday that nationwide wholesale diesel prices had gone up 50 cents per gallon. That will impact the trucks that carry goods from the ship to the shelves in the U.S.

Amazon, FedEx, UPS and the U.S. Postal Service trucks that bring goods to your door need to fuel up, too.

“The retailer is eventually passing that on to customers,” Bruun said. They may choose to ease some of that cost in the short term, she said, if they feel consumers won’t tolerate the price increase while gas and groceries are costing more.

Petroleum is used in making hundreds of consumer products from dentures and lipstick to tires and the road asphalt they drive on.  

If prices of crude oil remain high, the increased cost could eventually trickle down to consumers of these products, Bruun said, but it would take a while for that to happen.  

“Just because of the length of the supply chain, the different levels that it has to work through,” she said.

A spokesman for the Plastics Industry Association said in an email that the rise in oil prices is unlikely to have a major impact on the U.S. plastics industry. 

"It is difficult to say with any certainty what effect oil prices and the Ukraine situation will have on consumer goods in the broad sense, but we do not anticipate that they will contribute significantly to an increase in pricing for commodity plastics," the statement said. "That is due largely to the fact that U.S. plastics production relies on domestic sources of natural gas for ethane, not petroleum, and imports of external feedstocks are already restricted due to the existing challenges of the global supply chain."

Oil and wheat aren’t the only Russian exports impacted

Some other materials that are exported by Russia and Ukraine could become costlier and more scarce as the war continues, leading to increased prices for U.S. consumers.

Unfortunately one of those products is electric vehicles – which drivers may seek out as a way to find relief at the pump.

“Where the raw materials are impacted those aren't necessarily going to show up right away because a consumer isn't directly buying, say, nickel,” Bruun said. “But that's a raw material that goes into components that go into consumer goods. So it takes a while for things like that to filter through the supply chain.”

Nickel is a key component in the lithium-ion batteries used in EVs.

Other forms of transportation will be impacted

Individual drivers aren’t the only ones paying more for fuel at the moment. Jet fuel prices have skyrocketed, too.

“Ready to pay more on your next flight?” De Haan tweeted, “The cost to fill a 777-300 just went up by $22,600.”

 Consumers might be able to save by looking for flights that are listed as the most fuel-efficient because of the time of day and direction they are flying.

Taxi drivers and ride-share drivers also have to fill up their tanks.

Lyft and Uber each told USA TODAY that they were taking steps to ease the pain of rising gas prices for drivers but declined to say whether they would raise base rates for customers. 

Other ways consumers could be impacted

Cyber security experts have warned that sanctions could raise the risk that Russia will retaliate with cybersecurity attacks.

Attacks on U.S. companies could potentially slow supply chains further, depending on who is hit.

Economic impact:Could sanctions against Russia boomerang back on Americans?

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Bruun said the data shows consumers are already putting off bigger purchases or reducing discretionary spending because necessities including gas are more expensive. This drop in demand for items like cars, exercise equipment, vacations and meals out, could stall economic growth and depress prices, she said.

“Over the past year or so, demand has been very strong,” Bruun said. “People were coming out of the pandemic. A lot of people had excess savings. Incomes have been rising very quickly as wages have been growing.”

While supply shortages have contributed to recent high inflation, strong demand was also a factor in raising prices on consumer goods.  

As gas and groceries crowd out other spending, and inflation concerns cause consumers to delay big purchase, decreased demand could weigh on prices, she said. “Softer demand could mean softer price growth.”

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