KUALA LUMPUR (April 27): The war in Ukraine could keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report.

In the report released on Tuesday (April 26), the bank said the increase in energy prices over the past two years has been the largest since the 1973 oil crisis.

It said price increases for food commodities — of which Russia and Ukraine are large producers — and fertilisers, which rely on natural gas as a production input, have been the largest since 2008.

World Bank’s Vice President for Equitable Growth, Finance, and Institutions Indermit Gill said that 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,” he said.

Gill said 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,” he said.

The bank said energy prices are expected to rise more than 50% in 2022 before easing in 2023 and 2024.

It said non-energy prices, including agriculture and metals, are projected to increase almost 20% in 2022 and will also moderate in the following years.

Nevertheless, it said commodity prices are expected to remain well above the most recent five-year average.

The bank said that in the event of a prolonged war, or additional sanctions on Russia, prices could be even higher and more volatile than currently projected.

The World Bank said because of war-related trade and production disruptions, the price of Brent crude oil is expected to average US$100 a barrel in 2022, its highest level since 2013 and an increase of more than 40% compared to 2021.

It said prices are expected to moderate to US$92 in 2023 — well above the five-year average of US$60 a barrel.

Meanwhile, Ayhan Kose, Director of the World Bank’s Prospects Group said commodity markets are 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,” said Kose.