Gas prices in Utah and across the country have soared in recent weeks, largely due to the economic fallout from Russia’s invasion of Ukraine and further compounded by President Joe Biden’s decision , announced Tuesday, to ban US imports of Russian oil and gas.
But alongside record high gasoline and diesel prices, which not only hit consumers on a daily basis, but can drive up the prices of a wide variety of goods and services, what other economic impacts will residents and businesses in Utah expect to see as Russia’s military aggression against Ukraine approaches the three-week mark?
On Tuesday, the Salt Lake House convened a panel of local economic and business experts, along with Republican Utah Sen. Mitt Romney, to discuss how Utah is dealing with the unrest as they continue to unfold and disrupt global economic systems.
Romney, who is a member of the US Senate Foreign Relations Committee, said he supports Biden’s actions in response to Russia’s invasion, but also noted that current and previous administrations have not done so. enough to help build a bulwark in Ukraine to deter Russian aggression.
“I think you have to give the president and his administration real credit for bringing together so many nations, within NATO and some outside of NATO, to come together to put in place the sanctions that have been established,” Romney said. “And they got tougher partly because public opinion around the world…has been so overwhelmingly opposed to Russia that nations have been willing to sign tougher sanctions than I think could have been expected. .
“The big mistake of this administration was not providing enough weapons to Ukraine to really scare Russia off and I think that was a mistake not only of this administration but of previous administrations, Republican and Democratic alike. We we simply did not take the threat of a Russian invasion seriously enough to ensure that Ukraine had the defensive armament necessary to repel an attack.
Romney noted that several commodity indices were at or near historic highs this week and said it was too early to predict what future volatility to expect in global markets. He shared his concerns that European nations, which are much more dependent on Russian exports of energy and raw materials, could be pushed into an economic recession that has a chance of dragging the United States down with it. And, he noted that the global impacts were almost certain to fuel further inflationary pressures on consumers in Utah and across the country.
While escalating gasoline prices may be the earliest and most visible evidence of global market disruptions – Utah’s average price per gallon rose nearly 70 cents last week and was at $4.19 Wednesday according to AAA, just three cents off the state’s all-time high. – the Beehive State, on average, uses less gas than most.
Natalie Gochnour, associate dean at the University of Utah’s David Eccles School of Business and director of the Kem C. Gardner Policy Institute at U., attended Tuesday’s economic forum and said the great outdoors of Utah may lead to believe the state’s residents are, collectively, doing a lot of driving. But the data suggests otherwise.
“We are one of the lowest users per capita in the country,” Gochnour said. “It might surprise people because you would think we all drive long distances, but (our population) is very compact, very urban.”
Gochnour also noted that the high prices at the pump reflect that oil producers are getting the best price for the crude oil they extract and that Utah is one of the best states in the country when it comes to oil production, producing 87,000 barrels per day based on 2020 data.
And it’s a boon for local oil companies.
“When oil prices go up, if you’re not an energy-producing state, you’re only doing harm,” Gochnour said. “But when you’re an energy-producing state, you can benefit…and Utah is the 11th-largest oil-producing state in the nation.”
Gochnour said that in addition to oil and gas exports, other commodity markets in which Russian producers play an important role, such as wheat and some metals, are experiencing price escalation and that these factors come at a time when US inflation rose at its fastest. rate in decades. And this convergence of factors is likely to further fuel inflationary pressures.
But there is another factor that is likely to work in Utah’s favor when it comes to weathering the negative economic repercussions of sanctions aimed at isolating Russia from the rest of the world.
Gochnour cited pre-pandemic data indicating that of Utah’s $17 billion in exports in 2019, only about $20 million went to Russian markets. The state’s major international economic export markets are, in order, the United Kingdom, Canada, and Mexico. Russia ranked 43rd, by dollar value, in terms of export volumes that year.
Of these $20 million in Russian exports, about $6.3 million were food products, while machinery accounted for about $3.2 million and miscellaneous manufacturing generated about $3.2 million in value of goods. ‘export.
Miles Hansen, panel member and president/CEO of the World Trade Center Utah, who also spent years in the Middle East and Eastern Europe working for the US State Department, said a growing list of companies were restricting their activities in Russia and noted the impacts, due to the sanctions and the invasion itself, were also disrupting European markets in a way that required new calibrations for Utah companies there present.
“(Utah’s business community) needs to buckle up and focus on resilience,” Hansen said. “We cannot apply the practices of doing business in Europe as usual. This is going to have lasting impacts not only on raw materials, mining and energy, but also on other aspects of the economy.
But Hansen said he believes Utah is entering the current turmoil in a very strong economic position, and new opportunities will likely arise for Utah businesses that are nimble and looking for new markets.
Gochnour also sees Utah’s diverse and growing economy well positioned to meet the challenges ahead emanating from Russia’s invasion of Ukraine.
“In Utah, we go into this global conflict in a very strong position,” Gochnour said. “We have the fastest growing economy in the country and we are one of only four states whose economy has grown in the last two years.”