The EU-Russian oil embargo announced last month has a just cause and a higher goal: to punish Russia for invading Ukraine and free Europe from Moscow’s energy web. But it has collateral damage, like the crushing of family budgets of consumers worldwide, including the budgets of American and European consumers. They have to pay higher prices for energy, which has pushed inflation on both sides of the Atlantic to historically high levels. Last week, the US and EU reported May inflation numbers that run at annual rates of 8.7% and 8.1%, respectively, with the US inflation running at a 41-year high.
The crushing of family budgets is beginning to take its toll on consumer spending psychology, as consumer sentiment survey after survey and sales report after sales report from major retailers confirm.
“There’s a clear disruption in oil markets from the embargo that’s affecting consumers in America and Europe,” C3 Solutions VP of Public Policy, Nick Loris, told International Business Times.
“Even with some of the exemptions, it means that Russian oil will be rerouted or restricted at a time when oil markets are tight, and demand continues to rise as we head into the summer driving season. The collateral damage is that energy is a necessary component for just about everything we make and do. So, consumers are not just hit with higher prices at the pump but for many goods and services, which means they’re spending less elsewhere.”
Bob Bilbruck, the Founder and CEO of B2 Group and Captjur, agrees. He sees the EU embargo leading to energy price hikes, which act as a tax, depressing consumer spending.
“The EU, just like the US, is a consumer spending driven economy, so when they have to pay more for gas and oil, it is taking money away from stimulated spending in other areas of the economy,” he told International Business Times.
In addition, Bilbruck points to the inadequacy of EU and US green initiatives in offsetting the shortfall in the oil supply caused by the oil embargo.
“Current power grids around the world do not support everyone having an electric vehicle and there are not nearly enough charging stations to make this a reality – also couple this with solar, wind, and nuclear power not being in ample enough supply to produce this kind of electricity need; so, the result is you have a high need for cheap gas and oil to power most economies,” he adds.
Is there an alternative for the EU and the US in dealing with the Russian-Ukraine war? Bilbruck has an obvious answer.
“In my mind, there is only one solution, the EU and US brokering a peace deal between Ukraine and Russia and getting this fuel supply back into global markets,” he says.