If fighting in Gaza escalates in the Middle East, it could trigger a second energy crisis that would push up food and fuel prices, the World Bank warns.
Economists said that while the impact on oil prices would be limited if the conflict did not spread, the outlook would “quickly darken if the conflict escalates” and if violence spreads to the wider region it would risk increasing pressure on the oil sector. market. Global commodity markets are entering “uncharted territory.”
“The latest conflict in the Middle East follows the biggest shock to commodity markets since the 1970s: Russia’s war with Ukraine,” said Indermit Gill, chief economist at the World Bank. “This had devastating consequences for the global economy that continue to this day.
“Politicians must be vigilant. If the conflict escalates, the world economy will experience a double energy shock for the first time in decades – not only because of the war in Ukraine, but also because of the Middle East.”
The report warns that continued rise in oil prices will lead to higher food prices. Ayhan Kose, deputy chief economist at the World Bank, said: “If there is a major oil price shock, it will drive up food price inflation, which is already high in many developing countries.”
“At the end of 2022, more than 700 million people – almost a tenth of the world’s population – were undernourished. The escalation of the recent conflict will lead to increased food security not only in the region, but throughout the world.”
The World Commodity Outlook lays out three scenarios for global oil supplies in the event of a minor, moderate or major disruption.
Such a reduction would push oil prices to a range of $93 to $102 per day. let the trunk rise.
A “moderate disruption” would be similar to the effects seen at the start of the Iraq War in 2003, which cut global oil supplies by 3 to 5 million barrels per day. This will initially push oil prices up 21 to 35 percent to between $109 and $121 a barrel.
A “major destruction” scenario would be similar to the aftermath of the 1973 Yom Kippur War, when Syria and Egypt launched a surprise attack on Israel. This increased global oil supplies by 6–8 million barrels per day, causing prices to rise by 56–75 percent, with oil prices fluctuating between $140 and $157 per barrel.
In Britain, the oil crisis of 1973 led to soaring inflation, mass unemployment and political crisis.
The impact of the current conflict on global commodity markets is so far limited. Overall, oil prices have risen by about 6 percent since the conflict began. Prices for agricultural products, most metals and other raw materials remained virtually unchanged.
According to World Bank economists, if the war is limited to Israel and the Gaza Strip, its impact will be limited. Oil prices are expected to average $90 a barrel this quarter before falling to an average of $81 a barrel next year as global economic growth slows.
Overall commodity prices are expected to fall 4.1 percent next year. Agricultural prices are expected to fall next year as supply increases. Metal prices are also expected to fall by 5 percent in 2024.
Commodity prices are expected to generally stabilize by 2025.
RAC calls for lower gasoline prices
The threat of higher fuel prices comes as the RAC pushes the UK’s biggest fuel retailers to cut the price of petrol by at least 5p to 150p per liter to reflect much lower wholesale costs.
Although oil is currently trading at around $90 a barrel, the average wholesale petrol price last week was just over 113p, meaning that with the average UK unleaded petrol price of 155.33p the average trading range is over 16p per liter excluding VAT. .
This is above the long-term average of 7 cents per liter and above the 10 cent margin that smaller independent retailers now consider reasonable due to inflation, according to the RAC.
She says diesel, which currently costs an average of 162 cents in the UK, is about 4 cents a liter too expensive. Last week, a liter of wholesale diesel cost an average of 123p, meaning the average retail margin is around 12p, compared with the long-term 8p the RAC has maintained since 2012.
The RAC said above-average margins were “very concerning” given a recent Competition and Markets Authority investigation which found four major supermarkets overcharged their drivers by 6c per liter in 2022, costing them around £900 million pounds sterling. The RAC is concerned that recent history appears to be repeating itself.
RAC fuels spokesman Simon Williams said: “Sadly, our analysis shows that despite a Competition and Markets Authority investigation which confirmed motorists were being defrauded at petrol stations – something we have been saying for many years – and the Government’s response, nothing changed, the results reacted. »
“Drivers continue to face huge losses when wholesale prices fall. But in Northern Ireland, where supermarkets are not dominant, motorists get a fairer deal when it comes to fuel distribution, with a liter of unleaded petrol costing 150p and diesel costing 157p, 5p less than the UK average.
“Drivers and even the Treasury may be unhappy that the 5 cents per liter excise duty cut in place from the end of March 2022 is not being passed on to petrol stations.”
“An examination of RAC Fuel Watch data shows that profits have increased across the board and while retailers claim their costs have risen due to inflation, the irony remains that there is a clear link between pump prices and consumer price inflation.
“Failure to reduce pump prices to more equitable levels when there is a clear opportunity to do so has resulted in inflation remaining artificially high, which is clearly not in anyone’s best interests.”
Source: I News
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