War in Ukraine hiked California gas prices. Will food and consumer goods increase too?

The increase in prices of goods had already caused inflation to hike to 7.9% in the U.S. in the past year — a 40-year high since 1982, and it may continue to soar as the war in Ukraine wages on.

On Tuesday, President Joe Biden announced a ban on Russian imports of oil, liquified natural gas and coal to reduce dependence on Russian energy and to strip President Vladimir Putin of economic resources. Days later, Biden banned imports of Russian seafood, alcohol and diamonds.

Gas prices were already breaking records in California. As of Monday, the statewide price for regular gasoline came in at $5.74. According to the American Automobile Association, the average price just one week before was $5.34.

Economy experts are saying the price at the pump won’t be the only one increasing.

Food and plastic prices

The increase in gas prices creates a domino effect.

Amanda Blackwood, president and CEO of the Sacramento Metropolitan Chamber of Commerce, said when you think of gas, it’s not just what you fill up at the pump.

“It’s everything that’s used, every petroleum derivative, every plastic that relies on that product,” said Blackwood, who oversees the Northern California World Trade Center, among other agencies. So expect to see anything that is made with plastic to increase in cost, she said.

Fuel is also used to manufacture and transport products, said Suzanne O’Keefe, an economics professor at California State University, Sacramento. Essentially, goods that need to move from place to place may also increase due to transport costs.

“In addition, fertilizer prices are spiking because Russia isn’t exporting fertilizer,” said O’Keefe, who was an economist for the Center for Strategic Economic Research. She said both of these factors will lead to the increase of food prices.

“When those infrastructure prices go up, all other prices go up,” Blackwood said.

Will the price increase of goods happen quickly?

Prices were already increasing due to forces such as the economy rebounding from the COVID-19 pandemic, O’Keefe said. Direct effects on gasoline prices will happen quickly, and prices in other markets will eventually follow, she said.

Blackwood said it also depends on the business. Businesses that source products internationally or across the country may see rising costs hitting their bottom line quickly, she said.

If the business is able to float the costs, consumer prices may not surge immediately. But if it is unable to eat the costs, she said, then the overall prices for consumers will increase.

Do we know how much prices will increase?

Not yet.

“It is difficult to forecast the magnitude of the increase in prices,” O’Keefe said.

According to an AP report, services and goods, such as groceries, have gotten more expensive from January to February. Prices of groceries increased by 1.4%, fruits and vegetables hiked 2.3%, clothing went up by 0.7% and gas 6.6%.

Will inflation hit a specific region more than others?

Not likely.

“Inflation is widespread, so I doubt any region will escape this high inflationary period,” O’Keefe said. “There are differences in cost of living across regions, and those differences will likely persist, but inflation will occur everywhere.”

Blackwood said other than gas prices, she has not seen or heard about other prices inflating in the Sacramento area.

Is there anything people can do?

Rising prices not only hurts the wallets of consumers, but it also puts small businesses in a tight spot.

Blackwood urges that people shop locally.

“Keeping those dollars in your city, in your county, in your community, really makes a very real difference to that small business on being able to cover payroll and being able to weather these additional costs that they weren’t planning on,” she said.

She said the inflation will affect small, local organizations more drastically than a large chain, since the latter has more market representation.

“Please do business with them where you can and keep those discretionary dollars as local as we can,” she said, “to keep their doors open and keep tax revenues coming into our cities and counties, as we’re navigating another round of change.”

This story was originally published March 14, 2022 at 5:00 AM with the headline "War in Ukraine hiked California gas prices. Will food and consumer goods increase too?."