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According to the World Bank, the conflict in Ukraine has thrown a big wrench into commodities markets, causing global patterns of trade, production, and consumption to shift in ways that will keep prices at historically high levels until 2024.

This was stated in the World Bank’s latest Commodity Markets Outlook report.

The spike in energy costs over the previous two years has been the highest since the 1973 oil crisis, according to a new analysis from the Washington-based bank headlined “Food and energy price shocks from Ukraine war might linger for years.”

“The highest price increases since 2008 have been for food items, of which Russia and Ukraine are major producers, and fertilizers, which rely on natural gas as a production input.

“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 the trade of food, fuel and fertilizers,” said the World Bank’s Vice President for Equitable Growth, Finance, and Institutions, Indemit Gill

“These developments have started to raise the spectre of stagflation. Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy.”

Energy prices are anticipated to soar more than 50% in 2022, before reducing in 2023 and 2024, according to the analysis. Non-energy prices, such as agriculture and metals, are expected to rise over 20% in 2022 and then moderate in the years after that.

Despite this, commodity prices are likely to be significantly above the five-year average. Prices could be higher and more volatile than they are now in the event of a lengthy war or increased sanctions against Russia.

Because of trade and production delays caused by the war, the World Bank projects that Brent crude oil will average $100 per barrel in 2022, its highest level since 2013 and a 40% rise over 2021.

Prices are predicted to moderate to $92 per barrel in 2023, which is still significantly above the five-year average of $60. Natural gas prices in Europe are anticipated to be twice as high as they were in 2021 in 2022, while coal costs are expected to be 80% higher, both at all-time highs.

 “Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” said Director of the World Bank’s Prospects Group, Ayhan Jose, 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. Higher commodity prices exacerbate already elevated inflationary pressures around the world.”

The report said wheat prices were forecast to increase more than 40 per cent, reaching an all-time high in nominal terms 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.

“Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms,” said Senior Economist in the World Bank’s Prospects Group, John Baffes.

“This will have lasting knock-on effects. The sharp rise in input prices, such as energy and fertilizers, could lead to a reduction in food production particularly in developing economies. Lower input use will weigh on food production and quality, affecting food availability, rural incomes, and the livelihoods of the poor.”

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