UK food and energy prices ‘will rise further because of the Ukraine crisis’

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Here’s why.

In today’s news, Russia has started invading Ukraine which has sent shock waves across the world.

While the invasion is a tragedy in itself – many have warned it could trigger a third world war – it will also have a pretty drastic effect on both the price of energy and the price of food in the UK as a direct result.

That’s because one of the main gas pipelines runs from Russia to Europe and is currently stuck in the chaos.

This means that gas prices have risen even further, adding to the UK’s current energy and cost of living crisis.

Prices could also be affected by Germany’s decision to halt action on the Nord Stream 2 pipeline in an attempt to thwart any Russian invasion by demonstrating the sanctions that could be imposed if they go to war.

German Chancellor Olaf Scholz said Russia’s actions towards Ukraine marked a “grave violation of international law” and that the stoppage of the action must take place to “send a clear signal to Moscow that such actions will not go without consequences”.

Unfortunately, these sanctions will not only affect Russia, but Europe as well.

Just yesterday, the outage pushed gas prices in Europe up 13% and prices in the UK 8%, according to Pantheon economy.

Russia is also one of Europe’s top suppliers of oil, gas and wheat, and experts have been talking a lot about sharing that the conflict can only lead to higher prices as transport routes are disrupted and more.

Never heard of the pipeline? It is 764 miles long and has yet to open – despite construction work having finished last year – as it awaits approval from the European Commission and Germany.

Critics have long said the pipeline will only lead to a risky dependence on Russia for its energy supplies.

Politicians and experts have warned that the crisis in Ukraine will inevitably lead to an increase in the cost of energy.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdowntold the Online Mail that prices “are rising”, but “even higher prices are to come”.

“Wars are by their very nature inflationary and this would particularly be the case for Ukraine, when considering Europe’s dependence on Russia for oil, gas and key ingredients like wheat, so sanctions would be harsh and shortages of supplies could make prices skyrocket even further. ” she said.

“Gasoline and diesel have already hit new peaks at the pumps, causing even more pain for consumers already caught in the grip of the cost-of-living crisis.”

“The extra pounds in bills are piling up for hard-hit families, with the increase in fuel, energy and grocery bills hitting low-income families the hardest as a greater proportion of their expenses will be spent on travel costs.”

“With budgets being squeezed even further, the likely knock-on effect will be a blow to consumer confidence once the lockdown savings run out.”

The UK is already facing a cost-of-living crisis, with the Consumer Price Index (or CPI, the average price of consumer goods and services) at its highest level since 1992, according to Pantheon Economics. Rising energy costs, inflation and tax increases are impacting households.

 

 

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