World Bank Warns Energy Prices Will Jump 32% This Year

The World Bank has raised its outlook for global commodity prices, citing energy supply disruptions from the Middle East conflict and weaker agricultural output linked to El Niño.

Bloomberg reported on October 28 that the World Bank, in a report released that day, projected energy prices would rise 32% this year from a year earlier. That would mark a reversal after three straight years of declines. The bank said upward pressure should ease next year.

The World Bank forecast average international crude prices at $91 a barrel this year. Global oil supply is projected to fall 5.2% from a year earlier. Excluding 2020, when the Covid-19 pandemic first struck, that would be the steepest decline in more than 40 years.

Higher oil prices are also weighing on demand. The World Bank projects global oil consumption will decline 2.5% this year from a year earlier, the third-largest annual drop on record. It said any recovery in oil demand next year would remain limited.

Food prices are forecast to rise a cumulative 18% from this year through next year. El Niño is raising the risk of floods, droughts and extreme heat across multiple regions, the bank said, adding to pressure on agricultural production.

Metal prices are projected to climb 25% this year. Supply constraints, along with investment in power grids, electric vehicles, renewable energy and data centers, are supporting demand for aluminum, copper and tin.

"Commodity markets are being hit by several large shocks at the same time," World Bank Deputy Chief Economist Ayhan Kose said. He added that rising energy costs and trade disruptions could worsen inflation, food insecurity and slower growth.