Where will the economic ripples from Ukraine invasion hit the state?

Texas businesses and consumers are likely to feel aftershocks of the Russian invasion of Ukraine. The questions are “How much?” and “For how long?”

The war has injected chaos into the U.S. stock market. Gasoline prices, at or near nine-year highs, are expected to keep increasing. And it’s likely to add new frustrations to ongoing supply chain issues that have contributed to sharply rising inflation and continue to push up the costs of food and other goods.

Hearst Newspapers spoke to seven experts about potential effects of the invasion on the regional economy. And while most were sanguine about the outlook, they said that could change if the conflict escalates, rattling industries still recovering from the pandemic.

“In terms of the immediate impact on the Texas economy, the biggest thing that’s happening right now is the uncertainty,” said James Gaines, an economist with the Texas Real Estate Research Center at Texas A&M University. “It’s the psychological uncertainty in the market, and one thing that markets don’t like is uncertainty and high variability.”

Here are a few ways the conflict could affect Texans, according to experts.

Stock market

After a week of turbulence, U.S. stocks rebounded Wednesday, bolstered by the cohesive response of Western nations to the Russian invasion and news that the U.S. Federal Reserve would stick with plans to incrementally

increase interest rates to combat inflation that’s soared during the pandemic. The bumpiness continued Thursday and Friday, with major indexes veering up and down as uncertainties increased.

Citing a strong economy and tight labor market, Fed Chair Jerome Powell told Congress Wednesday morning that he

expects policymakers to raise interest rates by a quarter-percentage point when they meet in about two weeks, the first of a series of planned rate increases over the next year. But that may change depending on how the Ukraine conflict plays out, he said.

“The implications for the U.S. economy are highly uncertain,

and we will be monitoring the situation closely,” Powell told House Financial Services Committee members. “We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment.”

Thomas George, a professor of finance at Rice University’s Bauer College of Business, said the

conflict shouldn’t panic Texans about their 401(k) or other investments.

“By the time you get around to doing something to your portfolio as a reaction to crisis, you’re already too late,” he said. “You’re probably not going to get ahead of the news. So you shouldn’t be doing anything you wouldn’t be doing anyway.”

Energy

The most immediate effects on Texas consumers are likely to come at the pump as gasoline prices skyrocket — which will drive up the costs of nearly all goods.

While Russia is not a major player in the global economy, it has an outsize impact because of the leverage it wields on oil — it’s among the top three producers along with the United States and Saudi Arabia.

Oil settled Wednesday at more than $110 a barrel after jumping nearly $20 barrel since Friday. Economists say gasoline prices — already at a nine-year high — increase by 30 cents a gallon with every $10 increase in crude costs.

Global energy supplies were already tight. U.S crude inventories

are 12 percent lower than average for this time of year after falling another 2.6 million barrels in the week ending Feb. 25. Prices could reach $160 a barrel if Russian oil is sanctioned, which would shock the global economy and cause a recession, said Bill Gilmer, director of the University of Houston’s Bauer Institute for Regional Forecasting.

“Sanctioning Russian oil would be a mutually destructive act,” he said.

Western nations said Wednesday they’d release a total of 60 million barrels of oil from strategic petroleum reserves — the equivalent of about three days of U.S. petroleum consumption. That’s unlikely to drastically affect crude or gasoline prices that typically climb ahead of Memorial

Day in May.

Gasoline averaged $3.46 a gallon Friday in San Antonio and $3.84 a gallon nationally, according to AAA. The San Antonio average was up more than $1 from a year ago.

Thursday, fuel-price tracking website GasBuddy said San Francisco had become the first major U.S. city with average prices above $5 per gallon.

“Unfortunately, this record is likely just the beginning of a larger trend of price spikes to come,” said Patrick De Haan, head of petroleum analysis for GasBuddy.

Analysts have forecast that the war could take as much as 1 million barrels a day off of global markets and push oil prices to $135 a barrel by summer. That

translates into another $1 per gallon jump in gasoline prices, said Patrick Jankowski, senior vice president of research at the Greater Houston Partnership.

“To put it into perspective: a typical family of four with two kids and two vehicles — they consume roughly 1,000 gallons of gas a year,” Jankowski said. “That’s another $1,000 (per year) on gasoline just to go about their normal lives.”

Supply chains

The conflict could exacerbate supply chain disruptions and backlogs in international shipping. Recent surveys by the Federal Reserve Bank of Dallas found improvements for supply chains to Texas restaurants and other hospitality sector businesses. But many manufacturers say their problems persist.

Though Texas imports far less from Europe than East Coast ports, a sustained conflict in Ukraine could scare businesses into canceling or delaying orders, said Pia Orrenius, an economist at the Dallas Fed.

“It just adds a lot of uncertainty and volatility,” she said.

Food prices

Further chaos in supply chains — along with rising costs of production and labor shortages — could mean higher prices for consumers at the grocery store.

Ukraine exports roughly 15 percent of the globe’s corn and, together, Russia and Ukraine account for nearly 30 percent of global wheat exports. Wheat and corn are basic ingredients of a wide variety of food products so declines in those exports would send food prices even higher.

National food prices have increased by 7.5 percent nationally since January 2021.

“Prices are rising,” said Darren Hudson, director of the International Center for Agricultural Competitiveness at Texas Tech University. “Prices were already quite high prior to the Russian invasion and have escalated rapidly in the aftermath.”

Russia and Belarus are major suppliers of pesticides and fertilizers. Sanctions and other disruptions would increase costs for farmers, which could be passed on to consumers as higher food prices, experts said. Higher pesticide and fertilizer costs also would squeeze Texas’ agriculture sector after two years of supply chain hiccups, labor shortages and catastrophic weather events that have already driven up the cost of food production.

“Farmers will be impacted in the same ways as the consumer — paying higher prices at the grocery store and having limited access to their preferred products,” said Darby Campsey, spokesperson for the Texas Wheat Producers Board and Association.

Jerry Lara / Staff file photo Gas prices have been on the rise since Russia invaded Ukraine — and that will drive up the costs of other goods, experts say.

Kaylee C. Greenlee Beal / Contributor A young girl attends a demonstration in support of Ukraine at the Alamo last weekend as Texans follow the events across the globe. Amid the uncertainty, one professor at Rice University tells Texans not to panic about their investments.