Supply shortages have pushed prices of everyday commodities worldwide beyond all limits. Energy and other commodity prices have risen faster than forecast. By the World Bank's reckoning, energy prices are on average 80 per cent higher than last year, and food prices rose by up to 30 per cent on average early this year. They have eased somewhat, but it will take more time for the situation to return to normal.

Crude oil averaged $70 a barrel this year and may average up to $74 next year, the World Bank forecast in its Commodity Markets Outlook, published yesterday. The organisation publishes the forecast every quarter. This time it expects commodity markets to stabilise next year.

In the report, World Bank chief economist Ayhan Kose said the rise in energy prices would soon create a significant risk of inflation worldwide. If prices keep rising, pressure will grow on countries that depend on energy imports. Commodity prices that fell because of the coronavirus are now rising very fast, and unstable prices will add pressure on policymaking.

The report says some commodity prices this year were higher than in 2011. Natural gas and coal hit record highs because of inadequate supply, and electricity demand has returned to pre-pandemic levels, raising demand for energy. If demand normalises in 2022, prices will stabilise, but energy prices could rise further if natural gas stocks fall and supply does not return to normal.

The forecast says crude oil (Brent, WTI and Dubai) may average up to $70 (about Tk 6,000) this year and $74 (about Tk 6,300) next year. After the pandemic began, oil prices fell rapidly on the world market and at one point turned negative for lack of demand. This year prices have recovered by up to 70 per cent on last year's average.

The World Bank also warned that the rapid rise in prices could hamper growth of the world economy, which is now recovering as the pandemic eases. If supply shortages end, metal prices on the world market could fall by 5 per cent next year. This year, however, metal prices rose by an average of 48, against an earlier forecast of up to 22 per cent. After last year's steep fall, demand was expected to grow this year, but it grew faster than expected.

World Bank senior economist John Baffes said high energy prices add to inflationary pressure. Higher energy prices raise the cost of producing fertiliser, and so the cost of growing crops. Rising production costs have already cut the output of aluminium and zinc.

Source: Ittefaq. First published in Bengali on The Agro News.