The World Bank has warned that the conflict in Ukraine will result in the “largest commodity shock” since the 1970s.
According to a new forecast, the conflict’s disruption will result in massive price increases for goods ranging from natural gas to wheat and cotton. According to Peter Nagle, a co-author of the report, the price hike is “starting to have very large economic and humanitarian effects.” “Households all over the world are experiencing a cost-of-living crisis,” he said.
“We’re especially concerned about the poorest households because they spend a larger percentage of their income on food and energy, making them particularly vulnerable to this price spike,” the World Bank’s senior economist added.
According to the World Bank, energy prices are expected to rise by more than 50%, increasing household and business bills.
The most significant increase will be in the cost of natural gas in Europe, which is expected to more than double. Prices are expected to decline next year and in 2024, but they will still be 15% higher than last year.
According to the World Bank, “the largest 23-month increase in energy prices since the 1973 oil price hike,” when tensions in the Middle East sent prices soaring, occurred between April 2020 and March this year.
Similarly, oil prices are expected to remain high into 2024, with a barrel of Brent Crude, the benchmark measure, expected to average $100 this year, resulting in widespread inflation.
Russia produces about 11% of the world’s oil, the third largest share, but “disruptions resulting from the war are expected to have a lasting negative effect,” according to the report, as sanctions force foreign companies to leave and access to technology is limited.
Although Russia currently supplies 40% of the EU’s gas and 27% of its oil, European governments are working to wean their countries off of Russian supplies. This has aided in the rise of global prices by increasing demand for supplies from other countries.
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