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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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World Bank Sees High Energy Prices For Years After Russia’s War In Ukraine

  • World bank: Russian invasion of Ukraine will alter energy trade flows for years to come.
  • Elevated commodity prices will worsen inflationary pressures globally.
  • The World Bank expects crude prices to average $100 this year.

The biggest energy shock since the 1970s is expected to keep oil and other energy prices elevated for years as the Russian invasion of Ukraine is changing energy trade flows and consumption and production, the World Bank said in its latest Commodity Markets Outlook report on Tuesday.

Prices of food commodities have also soared, and together with the high energy prices and shocks to international oil trade, those elevated commodity prices will worsen inflationary pressures globally, the World Bank said.  

The price of Brent Crude oil is expected to average $100 per barrel this year, which would be a 42-percent increase from 2021 and its highest annual level since 2013. Non-energy prices are set to rise by about 20 percent in 2022, with the largest increases in commodities where Russia or Ukraine are key exporters, according to the World Bank.

Brent Crude prices are expected to moderate to $92 a barrel in 2023, down from the expected 2022 average, but well above the five-year average of $60 a barrel. European natural gas prices are forecast to be twice as high in 2022 as they were in 2021, while coal prices are projected to be 80 percent higher, with both prices at all-time highs, the World Bank notes.

“The war is also leading to more costly patterns of trade that could result in longer-lasting inflation. It is expected to cause a major diversion of trade in energy,” the bank said.

“Higher commodity prices exacerbate already elevated inflationary pressures around the world,” noted Ayhan Kose, Director of the World Bank’s Prospects Group.

The bank sees high commodity prices disrupting or delaying the energy transition in the near term.

“Several countries have announced plans to increase production of fossil fuels. High metal prices are also driving up the cost of renewable energy, which depends on metals such as aluminum and battery-grade nickel,” the World Bank said.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on April 26 2022 said:
    Since the Ukraine conflict erupted, it has become trendy to blame high energy prices on the conflict.

    Yet, energy prices have started to surge since the last quarter of 2020 because of pent-up demand in the aftermath of the lifting of lockdowns and the fact that the global oil market has been in its most bullish state since 2014 with global oil demand (and also other commodities) entering a super-cycle phase of accelerated demand growth which could last up to 10 years and carry Brent crude oil price to $120 a barrel in the next few years.

    The Ukraine conflict didn’t cause a disruption of oil and gas supplies and whatever premiums it added to energy prices have virtually disappeared with prices gradually returning to pre-conflict levels.

    It is also expected that once energy prices start to soar, they cause food commodities to soar.
    Moreover, higher commodity prices irrespective of the cause tend to exacerbate already elevated inflationary pressures around the world.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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