Chennai:The World Bank anticipates global commodity prices to tumble to a five-year low in 2025 amid an oil glut that is likely to limit the price effects of a wider conflict in the Middle East. However, overall commodity prices will remain 30 per cent higher than they were in the five years before the pandemic.
From 2024 through 2026, global commodity prices are projected to plummet by nearly 10 per cent. Global food prices are set to fall 9 per cent this year and an additional 4 per cent in 2025 before levelling off. That would still leave food prices nearly 25 per cent above the average level between 2015 and 2019.
Energy prices are expected to drop by 6 per cent in 2025 and an additional 2 per cent in 2026. However, an escalation in armed conflicts could complicate that effort by disrupting energy supply and driving up food and energy prices.
“Falling commodity prices and better supply conditions can provide a buffer against geopolitical shocks,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. “But they will do little to alleviate the pain of high food prices in developing countries…High prices, conflict, extreme weather, and other shocks have made more than 725 million people food insecure in 2024.”
Global oil supply is expected to exceed demand by an average of 1.2 million barrels per day, a glut that has been exceeded only twice before—during the pandemic-related shutdowns in 2020 and the 1998 oil-price collapse. While OPEC+ countries have 7 million spare capacity, several non-OPEC Countries are expected to ramp up oil production.
On the demand side, Chinese consumption has flatlined since 2023 due to a slowdown in industrial production and an increase in sales of electric vehicles and LNG-powered trucks.
However, the average price of gold is expected to hit a record this year and may rise during geopolitical and policy uncertainty. Over the next two years, gold prices are expected to remain 80 per cent higher than the average in the five years preceding the pandemic, declining only slightly.
