•Oil demand, inflation trigger fuel price volatility
The World Bank’s latest Commodity Markets Outlook predicts that the faltering economic growth, coupled with the ample oil supply, will lead to a drop in global commodity prices to their lowest level in 2026.
The study said the decline could moderate near-term inflation risks emerging from rising trade barriers but warned that it could also hamper prospects for economic progress in two out of every three developing economies.
According to the projection, global commodity prices are expected to tumble 12 per cent in 2025, and an additional five per cent in 2026, falling to levels not seen since 2020.It added that in nominal terms, prices would still be higher than they were before the start of the pandemic.
Adjusted for inflation, however, they are likely to fall for the first time below the average that prevailed from 2015 through 2019. That would mark the end of a boom fueled by the global economy’s rebound from the COVID-19 pandemic and Russia’s invasion of Ukraine in 2022.
Meanwhile, the global oil demand was projected to increase steadily throughout 2024, reaching an average of 103.3 million barrels per day (mbpd) by the fourth quarter, according to the Major Energies Marketers Association of Nigeria’s (MEMAN) 2024 Nigeria Energy Downstream Industry Report, released yesterday.
The volatile demand for oil growth in demand is expected to be driven primarily by non-Organisation for Economic Cooperation and Development (OECD) countries, with China and other Asian economies leading the way.
However, crude oil supply from both OECD and non-OECD countries is expected to remain stable, with the Organisation of the Petroleum Exporting Countries (OPEC), which includes Nigeria, maintaining its output at around 27.1 million barrels per day.
The report noted that the imbalance between rising demand and stable supply is likely to put upward pressure on global oil prices, which could have direct implications for Nigeria’s downstream petroleum sector. The country, with its limited domestic refining capacity, remains heavily reliant on imports for refined products.
MEMAN indicated that this reliance, combined with global market dynamics, has contributed to increased fuel prices and volatility within Nigeria’s petroleum supply chain.
The report also highlighted supply chain disruptions and inflationary pressures that have impacted the domestic downstream sector. Europe remains the dominant supplier of gasoline to Nigeria, with imports fluctuating between January 2023 and March 2025. However, MEMAN noted a significant shift in fuel supply beginning in late 2024, as the Dangote Refinery began contributing to the local fuel market. The refinery’s output is expected to gradually reduce Nigeria’s dependence on imports starting in November 2024.
The report also pointed out a general downward trend in international fuel prices, despite geopolitical tensions such as the ongoing Russia-Ukraine war.
On January 2, 2024, the price of gasoline was $768.75 per metric ton, but by the end of the year, it had fallen to $706 per metric ton.
MEMAN attributed the decline to several factors, including slower economic growth in Europe, the increasing adoption of electric vehicles, and greater supply from refineries in West Africa and the East of Suez markets.
In its report, MEMAN also highlighted the impact of Nigeria’s inflation rate, which remained a major concern for the economy, reaching 34.8 per cent in December 2024. The report stated that inflation, driven by factors such as currency depreciation, food supply issues, and rising production costs, continues to erode consumer purchasing power and increases operational costs for businesses, including those in the energy sector.
The weakening growth outlook represents the latest shock to hit the global economy in what is proving to be an extraordinarily tumultuous decade for commodity markets.
Indeed, commodity-price volatility has been higher than in any previous decade since at least the 1970s. The report noted that it remains to be seen whether this marks the beginning of a more turbulent era for commodity markets. But the confluence of trade tensions, conflicts, geopolitical risks, and frequent weather-related shocks makes it more likely.
In his response to the findings of the report, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said: “Higher commodity prices have been a boon for many developing economies, two-thirds of which are commodity exporters. But we are now seeing the highest price volatility in more than 50 years. The combination of high price volatility and low prices spells trouble. Developing economies will need to take three steps to protect themselves: first, restore fiscal discipline; second, create a more business-friendly environment to attract private capital; third, liberalise trade wherever the opportunity exists.”
Global commodity prices have been falling since 2023, helping to tamp down overall inflation across the world.The report projected that energy prices are expected to decrease by 17 per cent this year to the lowest level in five years before dropping an additional six per cent in 2026.
Prices of Brent crude oil are expected to average just $64 a barrel in 2025 – a decline of $17 from 2024 – and just $60 in 2026.
Coal prices are expected to drop by 27 per cent this year and an additional five per cent in 2026, as the growth of coal consumption for power generation in developing economies slows.
The report noted that the outlook reflects expectations for weaker economic growth as well as a long-term slowdown in global oil demand. In 2025, the global oil supply is expected to exceed demand by 0.7 million barrels per day. The rapid adoption of electric vehicles has also curbed oil demand: in China, the world’s largest automobile market, more than 40 per cent of new cars purchased last year were either battery-powered or hybrid vehicles. That is close to three times the share in 2021.
Accordingly, food prices are also expected to recede, falling by seven per cent in 2025 and an additional one per cent in 2026.Indeed, the United Nations estimates that acute food insecurity in some of the worst-hit areas globally will intensify this year, affecting 170 million people across 22 highly vulnerable economies.
SOURCE: gyardian.ng