Shift to more costly trade patterns has begun; transition to cleaner energy could be delayed
Food, fertiliser and energy prices will remain at historically high levels through the end of 2024 due to the shock dealt to commodity markets by the Russian invasion of Ukraine, a new report released by the World Bank April 26, 2022, has said.
Prices could be even higher and more volatile than currently projected in the event of a prolonged war, or additional sanctions on Russia, the report warned.
Energy prices are expected to rise more than 50 per cent in 2022, before easing in 2023 and 2024, the World Bank’s latest Commodity Markets Outlook report, said.
The price of Brent crude oil is expected to average $100 (Rs 7,661) a barrel in 2022, its highest level since 2013 and an increase of more than 40 per cent 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 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.
Non-energy prices, including agriculture and metals, are projected to increase almost 20 per cent in 2022 and will also moderate in the following years, according to a statement by the World Bank.
Wheat prices are forecast to increase more than 40 per cent, reaching an all-time high in nominal terms this year.
Read Down To Earth’s coverage of the Russian invasion of Ukarine
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 also noted that the increase in prices of some commodities was also driving up prices of other commodities. For instance, high natural-gas prices had raised fertiliser prices, putting upward pressure on agricultural prices.
In the near-term, higher prices threatened to disrupt or delay the transition to cleaner forms of energy, the report said.
For instance, several countries have announced plans to increase production of fossil fuels. High metal prices are also driving up the cost of renewable energy, which depends on metals such as aluminium and battery-grade nickel.
The report urged policymakers to act promptly to minimise harm to their citizens and to the global economy.
It called for targeted safety-net programmes such as cash transfers, school feeding programmes, and public work programmes, rather than food and fuel subsidies.
It also called on countries to accelerate the development of zero-carbon sources of energy such as renewables.
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The aftermath of Russian bombing in Kharkiv, Ukraine. Photo: iStock.png)
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