According to the World Bank's latest annual report, commodity prices are set to remain at high levels until the end of 2024. This rise in prices, which affects all resources, is accompanied by an increase in the costs of extracting and producing raw materials.
Rising energy and agricultural prices
According to World Bank forecasts, the rise in commodity prices is set to last until the end of 2024.
Firstly, the institution forecasts a 50% year-on-year rise in energy prices. In Europe, gas prices will increase by a factor of 2 in 2022 compared with the previous year, and coal prices will rise by 80%. The price of a barrel of Brent crude should average $100 for the whole of 2022. No decline is expected before 2023.
The war in Ukraine is also driving up grain prices. Russia and Ukraine have traditionally been among the world's biggest grain exporters, but the conflict between the two countries since February 24, 2022 is reshuffling the deck.
All products combined, agricultural prices are expected to rise by 18%, mainly due to higher wheat and corn prices. A 40% rise is expected in the price of a tonne of wheat, which should reach a record $450 this year. Two years ago, the average price for a tonne of wheat was 232 dollars.
Rising production and raw materials extraction costs
According to the World Bank, one of the reasons why raw materials prices are set to continue rising until 2024 is that all resources are affected. Consequently, it is impossible to remedy the situation by replacing raw materials with less expensive ones.
What's more, as the institution points out, rising raw material prices automatically lead to higher production costs, which are passed on to food prices. Indeed, the more expensive oil becomes, the higher the budget for diesel used in agricultural machinery; as for gas, the basic ingredient in nitrogen fertilizers, its rise inevitably impacts the price of fertilizers.
The same applies to metals, whose extraction and production costs are rising as energy prices rise. For example, aluminum production is very energy-intensive: in Europe, it takes 15.5 MWh to produce 1 tonne of aluminum, yet electricity prices are also rising. In addition, production costs are impacted by the general rise in wages, transport, storage and interest rates.
For the World Bank, the measures taken by governments to offset these price rises and preserve citizens' purchasing power are irrelevant. According to the institution, lowering taxes or subsidizing certain resources, as the French government has done with fuel, would not benefit the " most vulnerable ", and could even produce the opposite effect by " increasing energy demand ".