1. Although the Russia and Ukraine conflict is far from Singapore, we can eventually feel the butterfly effect in today’s globalised world.
2. It is likely that our cost of living will go up further as supply get disrupted by the war and reduced by the sanctions.
3. Singapore does not import much goods from Russia and Ukraine but China is a major trading partner of the two. Considering that China is the factory of the world, Singapore may feel the impact should the Chinese pass on the costs to us.
4. The inflation problem has already been going on prior to the war. The sudden spike in inflation was what caused the Fed to reverse their loose monetary policy and in turn, causing a rout in the US stock market.
5. In Singapore, we have already experienced rising electricity and petrol prices before the war started. Just in Feb 2022 alone, we saw petrol prices went up 4 times. The Brent crude oil shot past US$100 per barrel after Russia entered Ukrainian soil. So we might expect further petrol price increment sooner than later.
6. Crude oil price is the most obvious impact considering that Russia contributes 12% of global supply. Singapore imported US$1.22 billion worth of mineral fuels, oils, distillation products from Russia in 2020 and we might need to find alternative sources either because of supply problem or sanction compliance. Regardless, same demand chasing after lower supply causes price to go up.
7. Besides crude oil, Russia’s major exports include coal and wheat. Coal prices have shot up more than 100% from a year ago and just last week alone, it went up another 4.15%. That would hurt countries like China and India where they mainly burn coal for energy. Factories may pass down production costs downwards to us.
8. Wheat prices jumped 8.3% from a week ago. Wheat is Ukraine’s 4th largest export while Russia is the third biggest producer of wheat in the world. Wheat is a necessary ingredient for breads, cereals, biscuits, cakes, pizza, pasta and the likes.
9. Corn is Ukraine’s largest export and Ukraine is the 6th biggest producer of corn in the world. Corn price has jumped 5.2% in the past week. Some corn products include corn flour, corn oil, cornflakes, or use to make sugars like fructose or be used as a biofuel.
10. Below are the other commodities with notable price jumps in the past week:
Palm Oil +9%
Rapeseed +6.4%
Sugar +5.6%
Soybean +5.2%
Palladium +4.4%
11. Hence, we consumers should expect rising prices in our everyday items in the coming months. This is the new normal. Monetary Authority of Singapore may need to strengthen SGD further to combat inflation.
