War-driven shocks to keep commodity prices at historically high levels for years: World Bank

By Aysu Bicer

ANKARA (AA) - Commodity markets are facing a major shock due the Russia-Ukraine war, which is changing global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report on late Tuesday.

Especially the rise in energy prices over the past two years has been the largest since the 1973 oil crisis, while the price increases for food commodities have been the largest since 2008.

"Overall, this amounts to the largest commodity shock we’ve experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers," said Indermit Gill, World Bank’s vice president for equitable growth, finance, and institutions.

Energy prices are projected to rise more than 50% in 2022 before easing in 2023 and 2024, with non-energy prices, including agriculture and metals, expected to rise nearly 20% in 2022 and to moderate in the following years.

"Nevertheless, commodity prices are expected to remain well above the most recent five-year average. In the event of a prolonged war, or additional sanctions on Russia, prices could be even higher and more volatile than currently projected," the bank warned.

The price of Brent crude oil is expected to average $100 a barrel in 2022, its highest level since 2013 and an increase of more than 40% compared to 2021.

Prices are expected to moderate to $92 in 2023—well above the five-year average of $60 a barrel.

Natural-gas prices (European) are predicted to be twice as high in 2022 as they were in 2021, while coal prices are expected to be 80% higher, with both prices at all-time highs.

​​​​​​​Wheat prices are forecast to be up more than 40%, seeing an all-time high in nominal terms this year that will put pressure on developing economies that depend on wheat imports, especially from Russia and Ukraine.

Metal prices are projected to increase by 16% in 2022 before easing in 2023 but will remain at elevated levels.

"Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” said Ayhan Kose, director of the World Bank’s Prospects Group, which produces the Outlook report. "The resulting increase in food and energy prices is taking a significant human and economic toll -- and it will likely stall progress in reducing poverty."