ProcurementIQ is monitoring the ongoing situation in Ukraine and will provide updates and analysis on procurement impacts as information becomes available. See the Recent Developments section of our reports for more information.
The Russian invasion of Ukraine has caused drastic fluctuations in the oil and gas market with Brent Crude Oil prices nearly reaching $120 per barrel. Russia is one of the leading producers of oil and natural gas. While sanctions on the Russian economy have been targeted away from energy companies, the trickle-down effects from supply chain disruptions within Russia have been significant. As Russia continues its invasion of Ukraine, the price of crude oil will likely continue to rise and may exceed $150 per barrel. However, the United States and their allies have announced that they will release 60 million barrels of oil from their current strategic reserves to lessen spiking oil prices.
Still, the price of oil, natural gas, plastics, diesel fuel and gasoline will all likely rise as the Russian invasion persists. The United States national average for gasoline prices has risen to $3.61 with prices in major cities beginning to exceed $5.00 per gallon. This will cause the cost of shipping to increase, and suppliers may look to raise prices to maintain their margins. Furthermore, the supply chain for oil & gas is expected to become more strained as companies such as BP, Shell, and Exxon divest from Russian oil and gas operations. While the long-term impact of these decisions remains to be seen, the short-term effect will be rising prices due to a lower supply of crude oil and natural gas.
Impacted Markets
Gasoline
- Average gas prices have risen 24 cents since February and are projected to continue growing as the Russian invasion of Ukraine continues.
- The United States expects the release of strategic oil reserves to place significant downward pressure on these prices.
- Average diesel fuel prices have risen 30 cents since February, reaching $4.10 per gallon.
- Sharp growth in the price of diesel fuel will have a direct impact on the cost of shipping goods.
- Average jet fuel prices have risen 4.1% since February reaching $2.70 per gallon.
- This will pressure both commercial airlines and freight and cargo operators to increase their prices.
- Plastics News has speculated that the invasion of Ukraine could push the price of resins upward.
- Because oil is an input used to manufacture plastics, synthetic resin manufacturers are already bracing for destabilization in their supply chain.
- With the price of diesel fuel and gasoline rising sharply during February, the cost of national trucking services is projected to increase sharply.
- Suppliers may offset these costs by increasing the price of shipping passed on to buyers or raising the price of the goods themselves.
