World Bank forecasts higher commodity prices through 2024

WASHINGTON — The World Bank says commodity prices that reached historically elevated levels because of the war in Ukraine will remain high through the end of 2024.

The agency’s commodity markets outlook report released Tuesday says energy prices, food and fertilizer have sustained the largest commodity shock 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,” stated Indermit Gill, the World Bank’s vice-president for equitable growth, finance and institutions.

Energy prices, which over the past two years have sustained the biggest increases since the 1973 oil crisis, are expected to rise more than 50 per cent in 2022 before easing in 2023 and 2024.

Global Brent crude oil prices, currently at about US$105 per barrel, are expected to average US$100 in 2022. That’s the highest level since 2013 and an increase of more than 40 per cent compared with 2021. West Texas Intermediate rebounded Tuesday to about $101 per barrel.

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

European natural-gas prices are expected to be twice as high in 2022 as they were in 2021, while coal prices are expected to be 80 per cent higher, with both prices at all-time highs. High natural gas prices raise fertilizer prices, putting pressure on agricultural prices.

Non-energy prices, including agriculture — of which Russia and Ukraine are big producers — and metals, are projected to increase almost 20 per cent in 2022 and will also moderate in the following years.

Commodity prices are expected to remain well above the most recent five-year average.

The World Bank added that a prolonged war or additional sanctions on Russia could boost prices even higher and make them more volatile than currently projected.

“Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” added Ayhan Kose, director of the group that produced the 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. Higher commodity prices exacerbate already elevated inflationary pressures around the world.”

Wheat prices are forecast to increase more than 40 per cent, reaching an all-time high this year. That will put pressure on developing economies that rely on wheat imports, especially from Russia and Ukraine.

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

The report said higher prices threaten to disrupt or delay the transition to cleaner forms of energy with several countries announcing plans to boost production of fossil fuels, while high metal prices are driving up the cost of renewable energy.