Auburn, Ala. (WRBL)— Prices of gas, grocery, and other goods are on the rise following Russia’s attack on Ukraine. Harbert Eminent Scholar in supply chain management at Auburn University, Dr. Glenn Richey, explains to News 3 what is causing the rise in prices and what consumers can expect long term.

Dr. Richey starts by explaining the two major disruptions for the United States; air and train transportation blockages. These blockages are causing an inflation on prices of goods which can be seen in the grocery store, at gas pumps, and on other goods like technology and automobiles.

In North American countries specifically, the U.S. and Canada have halted all of Russia’s access to their airspace and vice versa. Dr. Richey says companies and countries are seeking alternate routes to transport goods and as a result, significant amount of travel time has been added on to the transportation of goods inherently causing an inflation of prices.

“We’ve created a massive block that’s going to make it more difficult to travel around the globe for the North American countries. When you think about it, you know, rather than being somewhere in Northern Europe and flying over to Canada or the United States, now you’ve got to fly around the entire girth of the Earth,” Dr. Richey explains.

The same issue of additional travel time applies to all products that were transported by trains due to the blockage of railways.

“There is a lot of freight and distribution of product that is just distributed to Europe that goes on trains through Russia… I think over the last six months, China shipped 300,000 ocean going containers via rail. And those are now going to have to go a different direction,” Dr. Richey says.

He says the re-routing of transported goods will cause a significant increase of prices. In addition to the added on transportation time, the price of fossil fuels are also on the rise as major energy conglomerates like BP, Exxon, Shell, and Mobil have stopped working with Russia.

Consumers can expect to see significant impacts due to the combination of additional resources needed to transport goods over longer distances and the increase in prices of fossil fuels. Dr. Richey explains how this translates to consumers.

“So the cost of freight is going to go up, which will be passed down to the customer. So you can expect to see prices go up as well, along with the cost of freight. And of course, oil and gas has gone up as well. And that relationship is going to be something that also raises prices so the customer should be on the lookout for prices of international goods to continue to climb,” he shares.

In President Biden’s State of the Union Address, Biden announced the U.S. and 30 other countries are planning to release 60 million barrels of oil. When asking Dr. Richey about the expected impact of President Biden’s plan, he believes this will only be a temporary fix.

“You may see a little blip in terms of the price as those are released, but you know, that’s a drop in the bucket versus what we use worldwide in terms of oil and gas. And the reality is it’s a one time shot. So, it’s really not going to have a long-term effect,” Dr. Richey states.

Instead of releasing oil, Dr. Richey thinks a more permanent solution would be to switch energy sources, looking towards environmental-based technologies.

“What we should try to do is use things like fossil fuels to pay for the new innovations in green tech. But we seem to not be doing that. And so it’s kind of put us in a negative position, this reliance on other international partners. I hope our government will really look at that and think about it hard, that being self-sufficient in volatile times is a very important thing in international business, he shares.

With the limited resources and additional transportation time, Dr. Richey says the next thing to increase prices is scarcity. He expects domestic companies will increase their prices because there are fewer products in the market and less international products being imported.

In addition to gas, groceries, and other goods, automotive industries will also see an increase in prices. With an ongoing chip shortage and now an increase in prices of petroleum-based products, Dr. Richey explains what is driving the prices and what consumers can expect in terms of prices.

“Cars have a lot of petroleum based products that are also part of their development. So, you think about tires, you think about the rubber components in the vehicle petroleum based parts, you know, those things get the double whammy because the price of petroleum is going up and the price of getting those parts where it needs to be is more expensive because the cost of transportation, which is also tied to petroleum. So, yeah, I wouldn’t think we’re going to see a reduction in the price of vehicles,” Dr. Richey explains.

When the economy inflates, prices tend to stay high for an extended amount of time. Dr. Richey says consumers will continue to see an inflation of prices.

“I think it’s here to stay with us for a while. If not just becoming the norm… when the numbers go up, they tend to kind of become the norm and standardized and we go from there. So, you know, I don’t expect that we see inflation coming down anytime soon,” he adds.

However, Dr. Richey cites economist Joseph Schumpeter who came up with the economics concept ‘creative destruction.’ This concept says the economy is forced to reassess its functionality and come up with more efficient modes of production.

“Essentially what happens is there are things that we’re doing that are inefficient, that don’t make sense, that perhaps put us in a risky situation like the pharmaceuticals being made overseas. And those things come to light to the public, and to business, and to the government, and it forces us to do things differently,” Dr. Richey shares.

Especially when wartime hits, the economy creates a ‘new’ to try and keep prices down for citizen consumers. Dr. Richey explains the positive affects this could potentially have in the long run.

In closing, he adds “the good news is, is that instances like this do typically breed innovation, and hopefully we’ll see some very interesting innovation and things that really help the citizen consumer over the next year or so.”