Energy prices to rise by around 50% in 2022: World Bank

June 03, 2022 (MLN): Energy prices are likely to rise by about 50% in 2022 compared to last year, says World Bank’s senior economist Peter Nagle.

Prices are expected to remain elevated for longer than previously anticipated, he added.

As per his key findings from the April 2022 edition of the Commodity Markets Outlook, the world is experiencing the largest commodity shock since the 1970s, with the war in Ukraine having dealt a major shock that is altering global patterns of trade, production, and consumption. These changes are expected to keep prices at historically high levels through the end of 2024.

Particularly, in the case of crude oil – the price for Brent crude oil, the international benchmark is expected to average about $100 a barrel this year. And that would be its highest level since 2013.

“We expect prices to decline a bit in 2023 and 2024, but they are expected to remain much higher than we had previously anticipated. Now in the case of natural gas, we're actually expecting prices to double in 2022 compared with last year,” he said in his outlook report.

Moreover, for food, the big action is in wheat prices, where a 40% increase in 2022 is expected.

This reflects the importance of Russia and Ukraine as exporters. Together they account for around one-quarter of global wheat exports and particularly exports from Ukraine have been interrupted by the war.

Now, this is a particular issue for countries in the Middle East and North Africa since they rely on Russia and Ukraine for a very large share of wheat imports, he said.

He noted that the other important aspect in food markets is the price of fertilizers. Fertilizers are made from natural gas and so the surge in prices of natural gas has also pushed up the price of fertilizers.

And a key risk is that farmers have started to use fewer fertilizers, which will reduce agricultural yields, particularly in developing countries, he added.

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