In the last year, commodities prices have risen due to the war in Ukraine. Before the war began the European Union imported most of its oil and natural gas from Russia via pipelines that ran through Ukraine.

As this is no longer happening for obvious reasons, the US has stepped in to fill the gap and make sure Europe has enough to provide heat and electricity through the winter. American steel, concrete, and petrochemical manufacturers had a hard time competing and were forced to pass their higher costs onto consumers. Regardless of how the war ends, Russia – and its resources – will not rejoin the world economy for a long time. This will keep manufacturing costs high in the short term.

Long-term forecasts for these commodities are more positive. Steel, concrete, and glass can be made in furnaces that run on electricity instead of gas. High costs for oil and gas will make switching a better option, and we expect more producers to do so in the coming years. This will free up resources for goods that have no substitute for petrochemicals, like plastics and architectural coatings, and provide pricing relief for them as well.