Ukraine is the third-largest producer of wheat in the world; Russia is the first. The hostilities generate uncertainty in the supply of this product to the international markets, causing an increase in the price of wheat and all the products that use it as an ingredient, said an expert analyst from CETYS.

After two years of the pandemic, humanity is facing a new challenge. A conflict that, although distant from everyday life in Mexico, will affect our wallets.

While 2022 brought widespread increases in consumer staples, price increases are not over.

Why will the conflict between Ukraine and Russia make your bread more expensive and fill up your gas tank too?

Ukraine is the third-largest producer of wheat in the world; Russia is the first. The hostilities generate uncertainty in the supply of this product to the international market. Therefore, given the lack of production in Ukraine, wheat price and all products that contain it will increase. “Don’t be surprised to find your favorite bread more expensive,” said Professor Alejandrina Barajas, who is a researcher at the Northwest Economic Research Center (CIEN), at CETYS Universidad Campus Mexicali.

Another price that will undoubtedly increase, she added, is that of gasoline. Triggered by the international conflict, on February 24, the price of a barrel of oil was already trading at 100 dollars, something that had not happened since 2014, threatening to prolong the recent brutal increase in gasoline and diesel prices. Also, gas will be more expensive. Both rises are because of the relevance of Russia in the international oil and gas markets.

“These increases in food and energy prices will drive up inflation, following its largest increase in recent history during 2021. If there was a scenario where inflation could be controlled during 2022, the aforementioned price increases have rendered it unfeasible. Inflation will continue to affect people’s purchasing power.”

Likewise, this scenario of high inflation will condition economic policy decisions, leading decision-makers to face the dilemma between controlling the increase in inflation or hindering a still fragile economic recovery with an increase in interest rates.

“Without a doubt, the combination of the sanctions, the disruptions of the war in Eastern Europe, and the impact of possible Russian retaliation in the energy markets will affect the economic recovery. This adds a layer of complexity to the lingering problems of the supply chains, thus encouraging governments to take more protectionist measures, presenting an outlook of another complicated year for the full recovery of the world economy,” concluded the specialist.