Economist predicts higher gas prices, inflation but future still uncertain amid Ukraine conflict

Published: Mar. 3, 2022 at 11:43 PM EST|Updated: Mar. 4, 2022 at 4:14 AM EST
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CHARLESTON, S.C. (WCSC) - An economist from the University of South Carolina says to expect higher gas prices and inflation over the next few months, but the long-term effects of the conflict on the economy are not yet clear.

Gov. Henry McMaster said Thursday that people have free will when it comes to Russian goods.

“I think businesses and all private citizens are, of course, perfectly entitled and free to do whatever they want to do,” McMaster said.

McMaster also said the state’s own investments will be pulled out of the country, as more and more businesses take their money elsewhere.

“Morgan Stanley Index Fund just recently made a move to divest itself of investments in Russia,” McMaster said. “And our investments will likely recede because of that.”

Joseph Von Nessen works as a research economist at the University of South Carolina. He said people will feel the heaviest impact from the conflict when they fill up at the pump.

That’s partly because increased demand because of pandemic restrictions easing and the U.S. not importing oil from Russia.

“The United States imports about 3 percent of its oil from Russia, so that does have an effect,” Von Nessen said. “It’s a relatively minor effect. Again, we don’t get the bulk of our oil from Russia, but it will have an effect on the margin and just exacerbate the increase in gas prices that we’re already seeing.”

Von Nessen said the current inflation rate stands at 7.5%, but with the U.S. no longer importing oil from Russia, that could lead to a higher inflation rate and prices overall in the short term.

“Energy is part of what goes into our measure of inflation,” Von Nessen said. “We do expect it to have a temporary effect on exacerbating that rate of inflation, moving that 7.5% up, potentially, but again, how long will that last? That’s hard to say because we don’t know what the outcome will be in Eastern Europe.”

President Joe Biden addressed the nationwide inflation and higher gas prices in his state of the union earlier this week, saying that he’ll be releasing 60 million barrels of oil from the worldwide reserves to reduce prices.

As far as the long-term effects of this conflict go, Von Nessen says it’s just too early to tell.

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