No good comes from war. Things lost cannot be recovered. Lives sacrificed remain only in memories. Heroism, though respected, invariably ends in tragedy.

So it is for the people of Ukraine as they battle an aggressive, tyrannical despot intent on re-making a union of socialist republics regardless of the human cost. Communist Russia had a reputation for paranoia, and Putin is demonstrating this in spades.

Grotesquely, amid all the misery of war, there will those who make a handsome profit. These are mostly investors who benefit from the profits of companies who have a direct interest in conflict. But it is also those who take advantage of a current wave of selling in international stock markets. Much of this selling is emotion based so there will be an expectation of a bounce in stock prices later on. So the educated investor buys on the dip and profits on that bounce. This is not for the faint-hearted and not pretty. But it is very rewarding if you don’t much care for the state of the world and its people.

Unfortunately, there are also many who feel the effects of war even if they do not have a direct connection to it. One way in which this becomes apparent is an increase in prices.

As we have noted before the price of petrol is rising rapidly. More recently, there has been a spike in oil prices because of the Ukraine conflict. Last month, our Prime Minister sounded the reassurance that his advice from the International Energy Authority was that the spike “would be short-lived”. Without wishing to be cynical, that’s what central banks said about inflation 6 months ago and it’s still going up.

One reason for the increase is the Ukraine war has sent crude oil prices soaring to their highest in 14 years, reflecting how no producer can easily replace Russian output.

With major oil producers, including members of OPEC, still wary about ramping up production for fear of a sudden price reversal, investors and economists say oil prices will remain elevated unless countries curb consumption.

We do not, perhaps, realise the influence of Russia on oil markets. Russia is the world’s third largest oil producer after the United States and Saudi Arabia. And Russia produces nearly as much as Saudi Arabia.

“No oil-producing countries can replace Russian oil supply to Europe,” said Tatsufumi Okoshi, a senior economist at Nomura Securities, referring to the major buyer of Russian oil. Even if Saudi Arabia and the United Arab Emirates — OPEC’s two biggest producers — increase output to their fullest, it would fall short of demand, he said.

OPEC last week agreed to maintain its plan to increase output by 400,000 barrels per day for April despite calls for additional production. Excluding Saudi Arabia and the United Arab Emirates, many countries have little spare capacity due in part to a lack of investment in oil production and have struggled to increase output.

Cutting demand might be the only option to curb rising energy prices, according to a Goldman Sachs report last week. Higher prices could directly force less consumption, or they may trigger an overall economic slowdown which ultimately reduces demand.

Today, the US and the UK have banned the import of Russian oil and gas. Although this will result in higher prices, Russian oil represents only a small part of their requirements so the inflation impact will be relatively muted. Europe, on the other hand, is heavily dependent on Russian oil and gas and has stepped back from an outright ban on imports because the economic impact would be too severe. How they got themselves into this position is food for a much longer study. As an aside, this also points to how the calculation of lives versus economic well-being really works but that, again, is a separate discussion. The irony is that payments made to Russia for their oil, helps fund the very war that countries are trying to stop.

But combine modest bans on Russian oil with the inability of current production to meet demand, and you have a recipe for further increases. Australian oil production has been in decline since 2009 as new reserve developments have failed to match the rate of depletion in existing fields. Oil production in 2019 showed a reversal to this long-term trend following the start-up of the Greater Enfield, Ichthys and Prelude projects on the North West Shelf.

We are a net importer of oil and import a large proportion of refinery feedstocks. Most of Australia’s oil is produced some distance from domestic east coast refining capacity. In addition, domestically produced grades of crude oil are generally not suited for local refineries compared to other internationally sourced oil.

Australia does have a strategic oil reserve and the government is looking at releasing some of it as part of a co-ordinated international effort to stabilise supply. Don’t get too excited though. Our oil reserve is not here, its in the United States so we can’t just call up and get a major delivery. And the reserve, at best, is equivalent to about 4 days of consumption in this country. On some estimates its as low as 2 days.

We have talked before about how oil is fundamental to our lives. It gets trucks across the Nullarbor, takes us to work, wraps our food, runs machinery to produce food and other products. It is so embedded in our cost structure that prolonged high prices can, and will, affect our cost of living.

But when we wince and moan about prices going up, the fuel at the pump is too expensive, spare a thought for the Ukrainians who are fighting for their freedom, to whom a rise in oil prices because of their war is simply not relevant. We continue to bask in the glow of a democracy and need to keep a perspective on the impact of world events on our wallets.

On the East Coast, lives have been lost, homes and businesses have been devastated. In Europe, as we have discussed, many lives have been sacrificed in the name of a terrible war. To provide a light-hearted recommendation of a wine for this month somehow seems inappropriate and I hope to be able to restore this next month.