Petrol and food prices will fall over next 2 years: World Bank

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Petrol and food prices will fall over the next two years due to an oversupply of oil production, the World Bank has said, offering hope to consumers that the cost pressures of the past three years could start to ease.

Its analysis found that this year’s downward trend in the oil price resulting from increased production, falling demand in China and the transition to clean energy is set to continue even if the conflict in the Middle East worsens.

World Bank said the knock-on effect of the tumbling value of oil would be to push down the average price of global commodities, including food and metals, to a five-year low.

From 2024 to 2026, global commodity prices are projected to tumble by nearly 10%. Global food prices are set to fall 9% this year and a further 4% in 2025 before levelling off, the Washington-based development organisation said in its latest commodity markets outlook.

Even so, overall commodity prices will remain 30% higher than they were in the five years before the Covid crisis hit in 2020, the report added.

The report will provide comfort to central banks concerned about the effect of rising prices on average inflation, allowing them to reduce interest rates at a faster pace than previously expected.

The World Bank said it expected the oversupply in 2025 to partly reflect a big shift in China, the world’s biggest manufacturer, “where oil demand has essentially flatlined since 2023 amid a slowdown in industrial production and an increase in sales of electric vehicles and trucks powered by liquefied natural gas (LNG)”.

The oil cartel Opec, which includes Saudi Arabia, Kuwait and Venezuela, has maintained supplies despite the downturn, but cuts to production were unlikely to have the effect of increasing prices.

Other oil producing nations – some of them connected to Opec as affiliates in the Opec+ grouping – were likely to ramp up exports to boost their own revenues.

Opec+, which includes Russia, maintains significant spare capacity amounting to 7m bpd, “almost double the amount on the eve of the pandemic in 2019”, the report said.

“The good news is that the global economy appears to be in much better shape than before to cope with a significant oil shock,” said Ayhan Kose, the World Bank Group’s deputy chief economist.

“That opens up some rare opportunities for policymakers in developing economies: first, declining commodity prices can provide a helpful complement to monetary policy to bring inflation back to targets; second, policymakers have a window to wind back costly fossil-fuel subsidies.”

It predicts the global supply of oil will exceed demand by an average of 1.2m barrels per day (bpd), pushing down prices from an average of $80 a barrel for Brent crude this year to $73 a barrel in 2025 and $72 in 2026.

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