Food and energy price surges worsened by the Ukraine war could last through the end of 2024 due to disruptions in trade and production, the World Bank Group said Tuesday. 

Increase in energy prices, which has reached the largest since the 1973 oil crisis, is expected to pass 50 per cent in 2022 before easing in 2023 and 2024, the multilateral group said in its Commodity Markets Outlook. Prices for agriculture and metals are projected to increase almost 20 per cent in 2022 before moderating at elevated levels in the following years. 

“Overall, this amounts to the largest commodity shock we’ve experienced since the 1970s,” Indermit Gill, the World Bank’s vice president for Equitable Growth, Finance, and Institutions, said in a statement. “As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers.”

The war could result in longer-lasting inflation and delay clean-energy transition as countries seek alternative trade routes and ramp up production of commodities, according to the report. The sharp rise in energy prices and, by extension, fertilizer costs could lead to food shortages and stall the progress in reducing global poverty. 

The bank forecasts wheat prices will jump more than 40 per cent, reaching an all-time high in nominal terms this year, putting pressure on developing economies that rely on imports, especially from Russia and Ukraine. Brent crude oil is expected to average US$100 a barrel in 2022, highest level since 2013, with prices for coal and natural-gas in Europe at all-time highs. Natural gas in Europe will more than double this year from 2021.

“While the outlook for commodity markets depends heavily on the duration of the war in Ukraine and the extent of sanctions, it is assumed that the channels through which commodity markets have been affected are likely to persist,” the analysts said in the report.

The group, an international policy maker that offers research and economic assistance to governments and countries of need, suggests policy makers to focus on tackling the underlying imbalance between supply and demand, instead of prioritizing energy subsidies and tax breaks which could aggravate the situation.

“This will have lasting knock-on effects,” said John Baffes, senior economist in the World Bank’s Prospects Group. High prices will “weigh on food production and quality, affecting food availability, rural incomes, and the livelihoods of the poor.”