How Russia’s Invasion of Ukraine May Affect the Southern California Economy

Ukraine May Affect the Southern California Economy

With Russia’s invasion of Ukraine started, the economic consequences could soon be felt in Southern California, particularly at the petrol pump.

Despite the fact that the United States does not import a huge volume of oil from Russia, Patrick De Haan, the head of petroleum analysis at GasBuddy, believes the country will not be immune to price increases.

“The difficulty isn’t necessarily that we receive [a negligible quantity of] oil from Russia; it’s that this is a worldwide market,” said De Haan, adding that just approximately 20,000 barrels of the 20 million barrels of oil imported by the United States daily have come from Russia.

“Think of it as one giant pool that fills up with oil, and every oil producer puts it in the same pool, and every country that buys oil pulls it out,” he explained.

How Russia’s Invasion of Ukraine May Affect the Southern California Economy

“If Russia stops putting oil in the pool, there is suddenly less for everyone, and the pool drains faster.”

According to De Haan, the Biden administration does not have many tools at its disposal. Because the strategic petroleum reserve is limited, other countries would have to increase supply to compensate.

“[President Biden] has already requested Saudi Arabia twice to raise output, and they have refused,” De Haan explained.

“The United States is in talks with many other powers in Vienna, and Iran might restart producing for the global market, which could mitigate some hit if Russia does reduce its exports.”

Another one of Russia’s important exports is wheat, although Manfred Keil, the director of the Lowe Institute of Political Economy at Claremont McKenna College, said he doesn’t expect there will be a big impact to that particular item in the U.S.

“Agriculture is often overstated,” remarked Keil. “We always worry about farms, yet they only account for 2% of employment and less than 1% of [GDP].”

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“Yes, it’s difficult for those who were harmed,” Keil said, referring to European markets that are more directly hit by Russian exports.

“However, if nothing else, this will benefit American agriculture.”