After a 60% surge this year, prompted by the war started by the Russian Federation in neighbouring Ukraine, energy prices are forecast to drop 11% next year. According to a World Bank report, a slower global economic growth and the Covid-related restrictions introduced in China may lead to an even more substantial decrease.
In spite of this slow-down, energy prices will still be 75% above the past five years’ average. The WB’s latest Commodity Markets Outlook, made public on Wednesday, indicates that the average price of Brent crude oil is likely to be 92 US dollars per barrel in 2023, and expected to drop to 80 US dollars per barrel in 2024, but it will be nevertheless substantially above the USD 60 multiannual average.
World Bank forecasts also indicate that Russia’s oil exports might decrease to 2 million barrels a day, as a result of the ban considered by the EU with respect to Russia’s oil and natural gas, adding to which will be restrictions related to the insurance and shipping of Russian oil and gas. The ban is scheduled to take effect next month.
Moreover, the report reads, G7 is looking at a yet untested price-capping mechanism, which may also affect Russia’s oil exports.
The WB analysis also takes into account the effects of the US dollar appreciating against the currencies of most developing economies, a situation that has led to rising foodstuff and fuel prices. And this, the financial institution warns, may deepen food insecurity which is already impacting 200 million people around the world. As the authors of the document explain, the mix of high prices for raw materials and the persistent currency depreciation translates into higher inflation in many countries.
In this context, emerging and developing economies should prepare for higher volatility in the global financial and commodity markets. WB experts say that currency depreciation forced nearly 60% of the emerging and developing economies to face increases in oil prices in their local currencies, following the Russian invasion in Ukraine.
The WB forecast also indicates that both natural gas and coal prices are expected to decrease in 2023 from the record-high levels reported this year, but natural gas prices in Europe may remain almost 4 times higher than the average for the past 5 years.
(Corina Cristea, Radio Romania International)
