No, there are not nuclear weapons exploding in New York, nor bombers overflying Washington, D.C. (yet). But the Russia-Ukraine War has come home to America and in a way which will destroy the US economy during the first half of 2022.
Two charts will sum up why:
Not only will this tax on the lower and middle class be fatal to the travel industry by this summer, especially if the wholesale price tops $4.50 per gallon as projected by some analysts, it will destroy retail sales in Q2 and Q3.
This is the chart that one could only call even more devastating:
The average American, of whom I have met many this past week, is totally clueless about the impact of diesel prices on the US economy. As someone who works in the massive industrial supply chain, believe me, this will be the final nail in the US economy’s coffin seizing up by autumn if President Drool doesn’t get this under control and fast. Inflation on its own was going to cause weekly price increase of 3-5% due to domestic distillate shortfalls but with the war the price stability and projections for transportation companies are impossible to determine. How will the US economy survive if weekly price increases happen for several more months and into the summer driving season?
Should the West consider isolating Russia further and shutting down all exports from Russia, prices will easily top over $5, maybe $6 per gallon. Hard as this is to believe these large transportation firms and the small truckers do not eat this cost, it is passed on to the consumer. For example, most fuel surcharges as of February 21, 2022 for LTL carriers was already north of 30% per shipment; at $5 per gallon for diesel, 50% fuel surcharges will not be unheard of.
That cost is passed on to the grocer, the retailer, and to the manufacturer. Let that sink in because there is one wild card that the West did not consider:
What happens if Russia decides to retaliate against all nations who put sanctions on their nation by cutting off all energy shipments to participating nations?
Think about it, as that is now a realistic possibility.
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