‘Crude Oil Price Expected To Average $100 A Barrel In 2022’
The price of Brent crude oil is expected to average $100 a barrel in 2022, a new World Bank report released on Tuesday in Washington, D.C. has said.
The report, known as Commodity Markets Outlook, attributed this to war-related trade and production disruptions.
The report said the development represent the highest level of crude oil price since 2013 and an increase of more than 40 percent 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 percent higher, with both prices at all-time highs,” the report said.
The report added that the war in Ukraine has dealt a major shock to commodity markets, altered global patterns of trade, production, and consumption and will keep prices at historically high levels through the end of 2024.
According to the latest Commodity Markets report, the increase in energy prices over the past two years has been the largest since the 1973 oil crisis.
“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 trade of food, fuel and fertilisers,” said Indermit Gill, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions.
He added: “These developments have started to raise the specter of stagflation. Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy.”
A statement announcing the report said energy prices would rise more than 50 percent in 2022 before easing in 2023 and 2024.
The statement reads: “Non-energy prices, including agriculture and metals, are projected to increase almost 20 percent in 2022 and will also moderate in the following years. Nevertheless, commodity prices are expected to remain well above the most recent five-year average. In the event of a prolonged war, or additional sanctions on Russia, prices could be even higher and more volatile than currently projected.
“Because of war-related trade and production disruptions, the price of Brent crude oil is expected to average $100 a barrel in 2022, its highest level since 2013 and an increase of more than 40 percent 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 percent higher, with both prices at all-time highs.”
The Director of the World Bank’s Prospects Group, which produces the Outlook report, Ayhan Kose, said commodity markets were experiencing one of the largest supply shocks in decades because of the war in Ukraine.
“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,” he said.
The report predicted that wheat prices would increase more than 40 percent, and put pressure on developing economies that rely on wheat imports, especially from Russia and Ukraine.
Metal prices, the report projected, will increase by 16 percent in 2022 before easing in 2023.
A Senior Economist in the World Bank’s Prospects Group, John Baffes, said: “Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms. This will have lasting knock-on effects. The sharp rise in input prices, such as energy and fertilisers, 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.”
