Is 2022 commodity crisis bigger than oil crisis of the 1970s?

The Russian invasion of Ukraine on 24 February has catapulted global commodity prices to record high levels. Both Russia and Ukraine are among the world’s leading producers of commodities, including crude oil, metals, and food products like wheat and corn.

Escalated tensions between Russia and Ukraine had pushed commodity prices close to registering the fastest pace for over half a century last week. On top of this, Western sanctions on Russian financial institutions have led many traders to exit from doing business in the country.

For many, escalating oil and commodity prices are giving flashbacks of the oil crisis in the 1970s. Let’s find if the 2022 commodity crisis is bigger than the oil crisis of the 1970s. 

Good Read: Here’s why precious metals are shining amid gloom of war

Rising commodity prices

The tussle between both the nations pushed Brent Crude Oil prices to as high as US$139.13/bbl on Tuesday after the US decided to ban Russian oil imports, further deepening supply concerns. 

Source: Refinitiv Eikon

The recent spike in crude oil prices had drawn comparison to the oil crisis of the 1970s when crude oil prices increased fourfold after the Organisation of Arab Petroleum Exporting Countries put an embargo on their oil exports.

Video Link- As Russia-Ukraine War Intensifies, Commodities Also Soars

Besides crude oil, the impact of the war has affected prices of other commodities like nickel, aluminium, palladium, etc., which rose to fresh all-time high levels lately. Additionally, food products including wheat, corn, palm oil and others have also jumped to multi-year highs in the past week.

Nickel prices also surged by a whopping 65% on Tuesday to hover near US$80,025/t after hitting US$101,365/t in previous session on the same day.

Also Read: Nickel price surpasses US$100,000/t; ASX nickel stocks rise

What stockbroker predicts

Analysts from leading investment firms, including Goldman Sachs, believe that the rally in the commodity market is just a trailer, and there is more to come. The broker has increased its Brent Crude Oil forecasts to average at US$135/bbl through 2022, significantly up from its previous forecast of US$98/bbl.

Source: © Bradcalkins | Megapixl.com

Furthermore, the stockbroker also predicts gold to hit US$2,500/oz this year, blasting through earlier highs of US$2072.50/oz, which was achieved in August 2020 amid the first wave of the COVID-19 pandemic.

Russia is a leading player in the commodity market. The country accounts for nearly one-third and one-tenth of the world’s total palladium and platinum production, respectively. The country also fulfils around 5% of the global nickel demand and is one of the leading suppliers of thermal coal. Its steel exports also account for about 6.5% of the world’s total sea-borne steel exports.

To know how commodities performed in the last week, click here

Ongoing Russia-Ukraine tensions are anticipated to flare up commodity prices, which are already facing the heat due to supply disruptions since the beginning of the COVID-19 pandemic.

Bottom Line

The global commodity market has witnessed a staggering price surge in the last week due to rising concerns related to supply shortages amid escalated tensions between Russia and Ukraine. As Russia-Ukraine tensions continue for a longer period, there remains significant ambiguity in the market regarding stabilising spiralling commodity prices.