For the first time in a long time, there is a war in Europe and it seems the entire mostly white population of the world is in a twist about it and that is bound to have some very bad effects on Zimbabwe that is likely going to result in, at the very least, an uptick in prices of common goods in Zimbabwe. You see, while it is very true that Ukraine and Russia are very distant countries far removed from our borders for their munitions to hit us we will still see the economic reverberations of this tussle.
Economic warfare and oil
While the West is very apathetic when it or someone else is butchering and bombing black or yellow people this time around western news channel anchors have gasped and raved about how this war is killing “blonde people with blue eyes in Europe.” They have started unleashing economic warfare on Russia the world’s second-largest oil producer and we have already seen a surge in oil prices. Most Zimbabweans probably don’t know that Russia is the world’s second-largest oil producer probably because the country is so far away and we don’t buy our oil from them.
This war has exposed Western Europe’s reliance on Russian oil and natural gas and the West is very keen to wean themselves off that. That’s the problem, even with increased usage of green energy you cannot wean yourself of oil that fast especially if you are an industrialised nation. The probable course of action will see the West switch suppliers and that will most probably result in them stomping on our toes and outbidding us and wresting our current suppliers from us in their bid to appear morally superior to Russia.
In the very short term, two things will happen.
- We will see a surge in world oil prices which might even go as high as the all important $150 per barrell mark.
- We will be forced to buy that unwanted Russian/Iranian oil which is further away from where usually buy oil. This will also increase the price we pay per litre of petrol/diesel or kg of LP Gas.
Prices might even go up further in the future because once the West has weaned itself from Russian supplies expect them to start waging indiscriminate warfare on anyone who dares touch that Russian oil like they do with Iranian oil at the moment. They will threaten sanctions to anyone who dares to buy Russian oil further pushing up the prices we pay per barrel. The only countries that would be able to defy that ban or get some concessions on this would probably be just China and India.
Oil is an important input in all industries
Oil is a very important input to a country like ours which is landlocked and produces very little. Transport costs are an important part of the pricing decision. If sellers have to pay more to import and deliver goods expect them to pass on that cost to the final customer. In an inflationary environment like ours, the lag time between when the price of an input goes up and when that cost is passed on to the customer is quite short. If the war between Ukraine and Russia continues to rage on expect some real serious effects on Zimbabwe fuel wise and ultimately in terms of prices we pay for commodities.
Already we are paying a steep US$1.44 per litre for Petrol the most used fuel. LP Gas prices have gone up from around US$1.40 per kg to the current US$2.10 per kg. Any further increases will put a strain on already stretched domestic budgets as commodity and service prices continue to go up faster than household incomes. Increases in fuel prices spurred on by international oil prices would have a devastating effect on prices. This will be made worse by what seems to be yet another brewing drought thanks to continuing global warming caused again by the same countries involved in the tussle.
We have a saying, when the elephants tussle, it is the grass that suffers. We are already suffering and stand to suffer more from a stupid war fought between the East and West in a faraway country.
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