Despite a recent drop in the price of oil from highs of over $139 per barrel in early March, global energy prices are expected to rise an incredible 50.5% this year, according to the World Bank’s April Commodity Markets Outlook report released on Tuesday. That’s the biggest jump since 1973. 

Crippling Western sanctions against Russia have disrupted the global trade of commodities, leading to huge energy price increases. And food prices are projected to rise 22.9% this year as well, the most since 2008, as wheat prices jump 40% to record highs.

Ukraine was expected to produce 10% of the world’s wheat in 2022, but the World Bank says anywhere from 25% to 50% of that production has been affected by the war.

“This amounts to the largest commodity shock we’ve experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel, and fertilizers,” Indermit Gill, the World Bank’s vice president for equitable growth, finance, and institutions, said in a statement accompanying the report.

Rising commodity prices have contributed to levels of inflation not seen in more than 40 years in the U.S., and a record high 7.5% jump in consumer prices in Europe. 

At the same time, forecasts for economic growth worldwide have taken a hit. The International Monetary Fund (IMF) cut its global growth forecast from a 4.4% January prediction to just 3.6% in April. And the World Bank slashed its global growth expectations for 2022 by nearly a full percentage point last week to 3.2%.

Rising commodity prices coupled with slowing global growth have experts at the international financial institution warning about the potential for stagflation—a combination of low economic growth and high inflation.

“These developments have started to raise the specter of stagflation. Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy,” Gill said.

Too little, too late

While global leaders have made efforts to counter rising commodity prices, the World Bank warned it may not be enough.

On March 29, President Joe Biden authorized the release of 180 million barrels of oil from the Strategic Petroleum Reserve from April through October in an attempt to curb record high gas prices. Other International Energy Agency (IEA) members agreed to release an additional 60 million barrels as well, but the World Bank said on Tuesday that oil inventory releases from strategic national reserves are only “a temporary solution,” noting that they will need to be refilled in the future. 

A move to clean energy could help reduce the West’s reliance on increasingly expensive fossil fuels, but higher energy prices and lagging supply threaten to disrupt the transition to clean energy moving forward, the World Bank says. 

A number of countries, including the U.S., have announced plans to boost fossil fuel production in 2022 to make up for lost Russian and Ukrainian supplies. And metal prices, which the World Bank says will rise 16% in 2022, are adding to the cost of the renewable energy transition, dramatically increasing the cost of battery storage technology.

The World Bank’s experts believe this will delay the clean energy transition, contradicting what U.K. government experts have argued—that the war could “supercharge” renewable energy capacity.

The World Bank also cautioned that rising energy and commodity costs will have a devastating impact on poorer nations.

“The resulting increase in food and energy prices is taking a significant human and economic toll—and it will likely stall progress in reducing poverty. Higher commodity prices exacerbate already elevated inflationary pressures around the world,” Ayhan Kose, director of the World Bank’s prospects group, said.