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Why Do Prices Keep Going Up?

The current national average for gas is $4.59, the highest in U.S. history. The state where consumers pay the most for regular gas is California, at $6.00 per gallon. In contrast, Oklahoma has the current lowest fuel prices, at $4.00 a gallon.

In March 2022, the U.S. Department of Agriculture said that nearly every item in the grocery store has increased in price. Additionally, in the last year, food prices have risen by 9.4%, which according to Trading Economics, is the most since April 1981. Citing Moody Analytics, CNBC reported that households are paying an average of $341.00 per month more for the same goods and services they paid for in 2021.

For this brief, Overwatch analyzed the primary reasons for rising prices: the Russia-Ukraine War, China’s COVID-19 lockdown and its tense relations with the U.S., and foreign manufacturers rising prices. Our research identified multiple factors which suggest that consumers will not see any significant relief anytime soon and will begin to see other rising costs outside of the grocery store and gas pump.

Russia-Ukraine War

The Russia-Ukraine War is in its third month now, with any negotiations between Ukraine and Russia on hold. Russia, the world’s largest wheat exporter, and Ukraine, the world’s 4th largest grain exporter, are impacted by the conflict. Russia’s wheat exports have decreased, while Ukraine cannot safely move its grain shipments through the Black Sea. According to the Ministry of Agrarian Policy and Food of Ukraine, thirty percent of territory in Ukraine is either “unsafe or occupied,” and some of the agricultural lands are either “damaged or mined.”

Russia is also the world’s largest exporter of fertilizer, followed by China. In March 2022, Russian President Vladimir Putin suspended fertilizer exports. China, however, halted fertilizer exports in the summer of 2021, with no current indications as to when the suspension could end.

Image Credit: Statista/Screenshot

Analysts note that farmers use an average of about 50lbs of fertilizer per acre, and the U.S. is currently the world’s third-largest importer of fertilizer.

Russia is the world’s third top oil producer. Sanctions against Russia have resulted in higher fuel and energy prices. The U.S. ban on Russian oil imports and talks of the European Union implementing an embargo against Russian oil could impact gas prices further. According to JP Morgan, the national average for gas could reach $6.20 a gallon by August.

Also, gas prices are typically highest during the summertime because summer-grade fuel is more expensive to produce. Summer travel increases lead to increased demand for gasoline which further allows the gasoline companies to increase prices during these months.

China and COVID-19

For the last ten years, China has been the number one manufacturer of products globally. The U.S. imports more goods from China than anywhere else globally, including electrical equipment, consumer electronics, metals, textiles, clothing, furniture, and appliances. U.S. defense contractors like Raytheon and Lockheed Martin rely on China for rare earths. Rare earths are used in defense systems and many other goods. Apple, for example, relies on China for rare earths for smartphones.

China is also the top producer of lithium-ion batteries, used in the production of mobile phones, laptops, digital cameras, electric vehicles, and some medical equipment. In 2020, per S&P Global, China accounted for 80% of lithium-ion battery imports to the United States.

Currently, however, China is dealing with a COVID-19 outbreak, resulting in lockdowns in Shanghai, Beijing, and Tianjin. The three cities under lockdown have the highest concentration of manufacturing in the world. If the outbreak spreads, leading to rising cases in Guangzhou and Shenzhen, the fourth and fifth cities with the highest manufacturing level on earth, Chinese authorities will implement more lockdowns.

Relations between the United States and China remain tense. On May 23, 2022, President Joe Biden said that the U.S. would respond militarily if China attacked Taiwan. In response, Chinese Foreign Ministry spokesman Wang Wenbin said that the U.S. would pay an unbearable price if it continued to support sovereignty for Taiwan.

Foreign Manufacturers and Trade Partners

On May 16, 2022, Data Center Dynamics reported that chip manufacturers are looking to raise prices. “The world’s largest contract chipmakers have warned customers that they plan to increase prices by as much as 20 percent. Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics Corp. (UMC), and Samsung are warning clients of the price hikes, citing inflation concerns, rising power and components costs, and high-interest rates.”

Most semiconductor chips are made in Taiwan. Semiconductor chips are critical technologies in smartphones, TVs, washing machines, refrigerators, computers, and advanced medical devices.

Chip manufacturer TMSC is building a plant in Arizona, which will begin producing chips by 2024. Intel is building a chip plant in Ohio and Samsung, one in Texas. However, like TMSC, those plants will not start manufacturing chips until 2024.

In May 2022, the Japan Times reported that over 40% of Japanese companies are set to raise their prices within a year due to increasing material costs. Japan is the United States’ fourth-largest trading partner.


With the ongoing Russia-Ukraine war and no diplomatic breakthroughs, we assess that food prices, specifically wheat-based products and produce, will remain high or could increase further. If the European Union imposes an oil embargo on Russia, gas and oil prices will likely increase. If fuel prices reach an average of $6.20 per gallon in the U.S., as JP Morgan forecasts, protests or potential civil unrest in U.S. cities could occur against the unsustainable costs.

Should COVID-19 spread further in China, the Chinese state will implement more lockdowns, impacting the global supply chain and rising costs on goods imported from China to the U.S. and its other trading partners. With tense relations between the U.S. and China and its majority control over Lithium on-battery production, there may also be increased prices on electronics and electric vehicles. China could launch a cyberattack damaging Taiwan’s technological sector, which would impact the global supply chain for semiconductor chips.

With major chip plants under construction but not operational until 2024, and foreign manufacturers raising costs, those buying electronics should see a slight increase in prices for the next 19 months. Consumers will likely see some reprieve once the chip plants begin producing goods in 2024.

With rising inflation and supply chain issues, other foreign companies may see a need to increase costs over the next year.


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