Oil and commodity prices could cost more than 4% of global GDP, according to Trafigura

Rising prices of raw materials, from oil to wheat, in the wake of Russia’s invasion of Ukraine could cost the world economy the equivalent of at least 4% of Gross Domestic Product (GDP), the brokerage said. Trafigure.

Oil prices, which Trafigurebased in Geneva, Already expected to hit $150 a barrel before the invasion, they could rise further because of the difficulty of rapidly substituting Russian crude, the company’s chief economist, Saad Rahim, said.

Some analysts have forecast that oil, now trading at $122 a barrel, could reach $200 or more.

United States has banned imports of Russian oil and Britain He has said that he will end his purchases. Other Western countries have not taken the same steps, but the sanctions are encouraging many companies to avoid crude from Russiaone of the largest exporters in the world.

“A $100 per barrel rise in prices will deal a 3.5% to 4% hit to global GDP if we stay at that level throughout the year”Rahim said, adding that the crisis was also driving up wheat and food prices around the world, which would make the impact even greater.

“This crisis comes in possibly the worst conditions in terms of inventories, flexible capacity and delivery capacity”he added.

Saudi Arabiaone of the few countries with spare capacity, could increase oil production, but that would reduce the global safety cushion, the return of Iranian crude could take months to come and Venezuela it cannot act quickly even if US sanctions are eased.

US shale drillers are also unable to ramp up production quickly.

“We were already very tight in terms of inventories outside of China, especially crude, but also diesel”Rahim noted, adding that the release of 60 million barrels by the International Energy Administration (IEA) would have a limited impact.

The shortage of crude oil and gas oil is reminiscent of the market in 2008, although now the world is not in a recession. “Oil demand has risen 17% since 2008, but world GDP has risen 32%”said.

On the sanctions, Rahim said: “The measures that have already been taken have put a lot of grit into the gears of global commodity trading, whether it be in freight, finance and insurance. All this serves to stop a large part of the flows”.