Peter Nagl, Senior Economist at the World Bank Group, noted the surge in commodity prices following the invasion of Ukraine: “This largely reflects the fact that both Russia and Ukraine are major commodity exporters. But even before that, we saw commodity prices rise as the economy reopened after lockdowns during COVID-19.”
“Now we see a large-scale rise in prices not only for energy, but also for food. This will have serious economic and humanitarian consequences,” he added.
The increase in energy prices over the past two years was the most significant since the 1973 oil crisis. Price increases for food products, of which Russia and Ukraine are major producers, as well as for fertilizers, which use natural gas, were the most significant since 2008.
Energy prices are expected to rise by more than 50 percent in 2022, before falling in 2023 and 2024. With disruptions to trade and production caused by the war, Brent crude will average $100 a barrel in 2022, the highest since 2013 and more than 40 percent higher than in 2021.
In 2023, the price is expected to drop to $92, well above the five-year average of $60 per barrel. Natural gas prices (European) in 2022 will be twice as high as in 2021, and coal prices will rise by 80 percent, both of which will reach historical highs.
According to the forecasts of the World Bank Group, a 40 percent increase in the price of wheat is possible in 2022, which reflects the importance of Russia and Ukraine as exporters. Together they account for about a quarter of world wheat exports. Exports from Ukraine were particularly affected by the war. The growth of these prices is very relevant for the countries of the Middle East and North Africa, as they receive a significant part of their wheat from Russia and Ukraine.
“For the average consumer, this means rising prices at gas stations, as well as in grocery stores. For the poorest families, this is especially bad, as they spend most of their income on food and energy and are therefore particularly vulnerable to such changes,” emphasized Peter Nagl.