Roughly 5% of global shipping is currently stuck near the Persian Gulf.
MICHIGAN, USA — Gas prices may be the first place West Michigan residents notice the economic impact of escalating military action involving the United States and Israel in the Middle East.
But experts say the effects could eventually spread further, including to grocery store shelves, if tensions continue.
“There’s certainly immediate impacts on the price of oil, which means there’ll be immediate impacts in the price of gasoline,” Dr. Paul Isely, associate dean at Grand Valley State University’s Seidman College of Business, told 13 ON YOUR SIDE Wednesday.
Oil prices jumped roughly $15 per barrel in just two days following the latest developments overseas.
Isely says that kind of increase can translate to about one to two cents per gallon at the pump for every dollar increase in oil prices.
While fuel prices can move quickly, other economic impacts may take longer to appear.
Isely says the conflict has already disrupted global shipping routes.
“About 5% of the shipping capacity in the world is either waiting to go into the Persian Gulf or waiting to leave the Persian Gulf right now,” Isely said.
That disruption can affect more than just fuel supplies. Natural gas shipments have also been impacted, which could eventually affect the cost of fertilizers, chemicals and pharmaceutical drugs.
“That’s a big deal because natural gas is a feedstock for lots of chemicals, lots of pharmaceuticals and for fertilizers that make your food,” Isely said.
If disruptions continue, he says consumers could begin to see price increases in some goods within a month or two.
For now, local grocery stores say prices remain largely unchanged.
“There’s a lot of volatility in a lot of markets right now,” said Alex Courts, store manager at Ken’s Fruit Market in Grand Rapids. “But we’re not really seeing gas prices affect anything specifically right now.”
Courts says it’s more seasonal weather issues in southern growing regions driving produce prices.
“The South had a lot of weather issues this year with all the cold, so that’s putting a lot of pressure on markets,” Courts said.
Still, he says higher fuel prices could eventually work their way through the supply chain.
“Usually fuel prices will affect things further on down,” Courts said. “You probably won’t see anything for a few weeks at least, but it definitely does.”
Transportation costs are built into nearly every step of getting food from farms to store shelves.
Courts says higher gas prices can also influence how customers shop, with some shoppers making fewer trips to the store to conserve fuel.
Beyond direct price impacts, economists say uncertainty surrounding global conflicts can also slow economic activity.
Fear of rising prices can lead businesses to delay investments and consumers to cut back spending, Isely said.
“Consumers are all about emotion,” Isely said. “If you feel scared or like something might go wrong, the natural instinct is to hold back.”
However, he says if tensions ease quickly, the economic effects may fade just as fast.
“If it were to all stop today and everything went back to the way it was before, within a month we wouldn’t even realize it happened economically,” Isely said.
