The past few weeks have seen a monumental buildup of troops at the western border of (arguably) one of the world’s great powers. Today, tens of thousands of soldiers are positioned on the frontline between Russia and Ukraine, with tens of thousands more at Ukraine’s border with Belarus. The tense situation has only been made worse by the present circumstances; Ukraine has been fighting Russian-backed separatists in its own territory for the past eight years, and has lost its Crimean peninsula to a Russian invasion.
Ukraine, though, has its allies. Numerous European countries, such as Germany, France, the UK, and others, are sending supplies and weaponry to the Ukrainian government. Additionally, the United States is sending troops to Eastern Europe, although they are not yet instructed to fight. To deter the rest of Europe from helping Ukraine, some strategists theorize that Russia may cut off its supplies of oil and natural gas, which Europe is dependent on. It’s generally agreed, though, that further Russian aggression would send the price of gas skyrocketing, which would hurt markets the world over, potentially driving gas prices up to 120 dollars a barrel.
Would the result be a repeat of the 70’s? I don’t think so: The US is not as dependent on foreign oil as it was back then, and OPEC, the organization that initiated the oil embargo last time, is not likely to do so again. However, OPEC is facing supply chain issues of its own. Numerous member countries are undergoing political turmoil, and the organization is struggling to keep up with oil demand.
The domestic consequences are enormous. High oil prices can theoretically cause stagflation, or the persistence of high inflation and unemployment: a political death sentence, sure to influence the up-and-coming midterm elections in November. Other effects are more nuanced: Increased efforts to get oil prices down may divert from green energy initiatives, but the expensive gas prices may push more people to EVs. Time will tell, however, whether Russia will invade Ukraine at all.