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How Russia Ukraine war will affect your living

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The answer to the title of this article is Expensive Crude Oil. As you know because of Russia Ukraine war the energy prices across the world has gone up like anything. Not just war there are other reasons too. But the secondary reasons take refuge under the primary reason and if you see currently Russia Ukraine war is the hot topic. 

Now try to understand this when oil prices go up all modes of transportation whether sea land or air. Primarily sea transportation that is freight rates are going up rapidly. When transportation cost increases that also increases the overall cost of raw material. And then there are some oil companies who will take advantage of the situation. They will see this situation as an opportunity to earn more profit or recover their debts. This kind of business behavior also exists we cannot deny that. 

Let's say company a bought oil from countries like Russia, Saudi, United States or Europe and that company bought the oil at a time when the oil prices were at 90 US Dollar a barrel. And then these companies have stored the oil in their tanks. 

Today if you see the oil prices of WTI Crude, Brent Crude, OPEC Basket the cost is somewhere around 120 to 130 per barrel. OPEC is around 117 per barrel. It is the cheapest right now anyhow. So currently the oil prices are high. Then company a knows that in the coming days oil prices will increase furthermore; that means oil companies are going to hold and wait more when the prices of oil go a little more higher. 

There are reports that suggest oil prices will go up as high as 180 Dollars per barrel in a few days. So anyhow the point is oil companies store oil or let's say if you are a shipping company and you need fuel for your ships to carry freight. If you approach any oil company they are not going to sell you oil in today's price. They will ask you more because they know that in a few days as it is the price will go up. As a shipping company you have your own cost and business to look after and also time is your enemy for carrying logistics because you have to be on time and then you know that there is huge export and import demands from countries. 

Then what you do is you buy that oil at whatever the price they ask, as a shipping company you're going to transfer that cost on companies that want to transport their goods through your ships. This way let's say you buy a laptop which is 50 000 rupees or 650 dollar. Now the laptop company who exports that laptop to India will have to pay more to the shipping company for transportation. As a result that laptop company will increase the cost of their laptops from 650 to 700 or 57 000 rupees. Now the same example is applicable on raw materials as well. Replace laptop with other raw materials like coal, iron, ore, copper, aluminum, rubber, organic chemicals, precious metal, compound machinery, electrical components and many more. 

When a country imports something in bulk, they do it through sea route. Cargo ships are the only possible way of transporting raw materials in bulk. These huge cargo ships consume a lot of diesel fuel and if you see diesel fuel, petrol fuel they're actually refined from crude oil. So if the prices of crude oil increases; it will have a trickle down effect on everything in between and the increase in price has to be born by the end consumer. 

So you see how the rise in oil prices became a catalyst in the rise of raw material prices. As an ordinary human when we think about it how come the prices of everything has increased in which industry it is used - It is used in auto appliances construction and real estate and we all know how steel is made right. It also needs certain raw materials or pairing raw materials. Some raw materials are imported from other countries and to get them you need to bring them in large ships. 

So anyhow when the price of fuel increases the transportation cost will increase and then the company which extracts these raw materials from earth. Even they use large machineries that also requires fuel as a result the extraction process becomes expensive, then transportation becomes expensive. So the overall cost of import also increases. That means ultimately the cost of HRC and TMT steel bars will increase and when you use this steel to make vehicles appliances or in construction naturally the cost of vehicle appliances and the cost of property will increase. And then people who work in these industries they will also demand a hike in their salaries. After all they also need to consume right they also have to buy things, to eat, pay rent, consume electricity, medicines, buy vehicles, etc. 

So like this price of everything increases and that is also how economy works. And then that is also How Eventually Cost of Living Increases. 

But Why Putin Wants Ukraine?

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