The global economic shock of the COVID-19 pandemic has driven most commodity prices down and is expected to result in substantially lower prices over 2020, the World Bank said in its April Commodity Markets Outlook.
Energy and metals commodities are the most affected by the sudden stop to economic activity and the serious global slowdown that is anticipated. Commodities associated with transportation, including oil, have experienced the steepest declines. Despite only moderate impact on the outlook for most agricultural commodities, supply chain disruptions and government steps to restrict exports or stockpile commodities raise concerns that food security may be at risk in places, the report says.
“In addition to the devastating human toll, the economic impact of the pandemic will dampen demand and cause supply disruptions, negatively affecting developing countries that rely heavily on commodities,” said Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance & Institutions. “Policymakers can take advantage of lower oil prices by undertaking energy-subsidy reforms to help free spending for urgent pandemic-related purposes. These reforms need to be complemented with stronger social safety nets to protect the most vulnerable segments of society. Policymakers must resist the urge to impose trade restrictions and actions that put food security at risk, as the poor would be hit the hardest.”
Monthly average crude oil prices plunged 50 percent between January and March. Prices reached an historic low in April with some benchmarks trading at negative levels. They are expected to average $35 per barrel in 2020, a sharp downward revision from the October forecast and a 43 percent drop from the 2019 average of $61 per barrel. The downward revision reflects an historically large drop in demand. The decline in crude oil prices has been exacerbated by uncertainty around production agreements among the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers. Energy prices overall (which also include natural gas and coal) are expected to average 40 percent lower in 2020 but see a sizeable rebound in 2021.
Metal prices also fell in early 2020. The biggest declines were in copper and zinc, which are particularly associated with global economic activity. Metal prices are projected to drop 13 percent overall in 2020 as slowing demand and the shutdown of key industries weigh heavily on the market. Industrial metals would be affected the most by the global economic slowdown, in particular that of China, which accounts for more than half of global metals demand.
Agriculture prices are less tied to economic growth, and saw only minor declines in the first quarter of 2020, except for rubber, which is used in transportation. Prices are expected to remain broadly stable in 2020 overall as production levels and stocks of most staple foods are at record highs. However, agricultural commodity production could face disruptions to the trade and distribution of inputs such as fertilizer, pesticides, and labor availability. Disruptions of supply chains have already affected emerging market and developing country exports of perishable products such as flowers, fruits, and vegetables.
“This enormous shock to commodity markets and low oil prices could deliver a serious setback to developing economies and jeopardize the necessary investments in critical infrastructure that support long term growth and create quality jobs,” said Makhtar Diop, World Bank Vice President for Infrastructure. “The international community must rally together to address these setbacks by advancing interventions in diverse sources of energy, sustainable transport and access to digital infrastructure and services that allow people to stay connected during these uncertain times. This will be key to delivering vital social services, protecting jobs, supporting business and saving lives.”
An analytical focus examines the impact of the COVID-19 pandemic on commodity markets. Mitigation measures taken to control the virus have resulted in an unprecedented collapse in oil demand, and supply chain disruptions could cause dislocations in the consumption and production of other commodities and imperil food security. The pandemic has the potential to affect commodity demand and supply for an extended period, the analysis finds.
The plunge in oil prices provides policymakers in emerging market and developing economies with an opportunity to undertake energy-subsidy reforms. These reforms can help free spending for urgent pandemic-related purposes, discourage wasteful energy consumption, and reallocate spending to programs that better target the poor.
Another analytical section looks at OPEC in the context of other similar commodity supply management agreements. Such agreements have collapsed over time under pressure from economic forces and other events, and OPEC may be subject to the same pressures.
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help these countries strengthen their pandemic response. Over the next 15 months, the World Bank Group will be deploying up to $160 billion in financial support to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery, including $50 billion of new IDA resources in grants or highly concessional terms. The Bank is also increasing disease surveillance, improving public health interventions, and helping the private sector continue to operate and sustain jobs.
Conflict Affected Families in Armenia to Receive World Bank Support
A Grant Agreement for the “Support to Conflict Affected Families” project was signed today by Sylvie Bossoutrot, World Bank Country Manager for Armenia, and Atom Janjughazyan, Acting Minister of Finance of Armenia. Funds for the project are provided by the multi-donor State and Peacebuilding Fund (SPF), through a one-year grant of $3.72 million.
The Government of Armenia has developed a broader social protection response package with support from development partners and non-governmental organizations. This project will be implemented by the Ministry of Labor and Social Affairs of Armenia, through its subordinated agency — the Unified Social Service — and aims to improve the resilience of conflict affected people and reduce the financial burden of host families, with a particular focus on women and vulnerable members of the population.
“We are pleased to sign this timely Agreement supported by the State and Peacebuilding Fund Grant,” said Sylvie Bossoutrot, World Bank Country Manager for Armenia. “This project is of extreme importance and the assistance granted to displaced individuals and their host families will help to improve the resilience of families affected by the conflict.”
The proposed project will contribute to selected social protection and employment support programs, which are part of a larger support package targeting displaced people and their host families, from the Government of Armenia.
Specifically, the project aims to:
- Reach around 11,530 displaced persons with a monthly cash benefit equal to the minimum wage (68,000 AMD) per adult/child for up to four months in Armenia.
- Provide cash assistance/income support to 3,975 families in Armenia hosting displaced people to help meet basic consumption needs.
- Temporarily subsidize an employment program for 936 displaced people who are looking to gain work experience in Armenia and facilitate their labor market participation and economic inclusion.
- Support 115 displaced individuals through the public works program (cash-for-work).
“The project is designed to especially benefit women affected by the conflict,” said Maddalena Honorati, World Bank Task Team Leader. “According to a rapid multi-sector needs assessment conducted last December, women represent 70 percent of the adult displaced population. The cash transfers will help them meet their basic needs on a day-to-day basis. More importantly, the project will improve the resilience of the displaced families and promote social cohesion in their host communities.”
The State and Peacebuilding Fund is a global fund administered by the World Bank to finance critical development operations and analysis in situations of fragility, conflict, and violence (FCV). The SPF is kindly supported by Australia, Denmark, France, Germany, The Netherlands, Norway, Sweden, Switzerland, The United Kingdom, as well as the World Bank.
Cut methane emissions to avert global temperature rise
Methane emissions caused by human activity can be reduced by up to 45 per cent this decade, thus helping to keep global temperature rise to 1.5 degrees Celsius in line with the Paris Agreement on climate change, according to a UN-backed report published on Thursday.
The Global Methane Assessment outlines the benefits of mitigating methane, a key ingredient in smog, which include preventing some 260,000 premature deaths and 775,000 asthma-related hospital visits annually, as well as 25 million tonnes in crop losses.
The study is the work of the Climate and Clean Air Coalition (CCAC), a global partnership of governments and non-State partners, and the UN Environment Programme (UNEP).
“Cutting methane is the strongest lever we have to slow climate change over the next 25 years and complements necessary efforts to reduce carbon dioxide. The benefits to society, economies, and the environmental are numerous and far outweigh the cost”, said Inger Andersen, the UNEP Executive Director.
Methane is an extremely powerful greenhouse gas, responsible for around 30 per cent of warming since the pre-industrial era.
Most human-caused methane emissions come from three sectors: fossil fuels, such as oil and gas processing; landfills and waste; and agriculture, chiefly related to livestock.
Emissions ever increasing
The report underscores why international action is urgently needed as human-caused methane emissions are increasing faster than at any time since record keeping began in the 1980s.
Even with the COVID-19 pandemic causing an economic slowdown in 2020, which prevented another record year for carbon dioxide (CO2) emissions, data from the United States National Oceanic and Atmospheric Administration (NOAA) shows the amount of methane in the atmosphere reached record levels last year.
The good news
However, unlike CO2, which stays in the atmosphere for centuries, methane breaks down quickly and most is gone after a decade, meaning action can rapidly reduce the rate of global warming in the near-term.
Methane accounts for nearly one-fifth of global greenhouse gas emissions, according to Rick Duke, Senior Advisor to John Kerry, the US Special Presidential Envoy on Climate Change.
“The United States is committed to driving down methane emissions both at home and globally—through measures like research and development, standards to control fossil and landfill methane, and incentives to address agricultural methane”, he said.
Solutions readily available
The Assessment identifies readily available solutions that would reduce methane emissions by 30 per cent by 2030, mainly in the fossil fuel sector. Most, or around 60 per cent, are low cost and half have “negative costs”, meaning companies will make money from taking action.
So-called “mitigation potential” varies between countries and regions, according to the report. For example, whereas the largest potential in Europe and India is in the waste sector, in China it is from coal production and livestock, while in Africa it is from livestock followed by oil and gas.
“But targeted measures alone are not enough”, the partners warned. “Additional measures that do not specifically target methane, like a shift to renewable energy, residential and commercial energy efficiency, and a reduction in food loss and waste, can reduce methane emissions by a further 15 per cent by 2030.”
Drew Shindell, a Professor of Climate Science at Duke University in the USA, who chaired the assessment for the CCAC, said urgent steps must be taken to reduce methane emissions this decade.
“To achieve global climate goals, we must reduce methane emissions while also urgently reducing carbon dioxide emissions,” Dr Shindell said. “The good news is that most of the required actions bring not only climate benefits but also health and financial benefits, and all the technology needed is already available.”
UN: Stop evictions in East Jerusalem neighbourhood immediately
The UN’s human rights office (OHCHR), on Friday, called on Israel to immediately halt all forced evictions, including those in the Sheikh Jarrah neighbourhood of East Jerusalem, as well as to exercise maximum restraint in the use of force while ensuring safety and security there.
Eight Palestinian refugee families residing in Sheikh Jarrah are facing forced eviction due to a legal challenge by the Nahalat Shimon settler organization, with the risk “imminent” for four of the families, according to the office.
“Given the disturbing scenes in Sheikh Jarrah over the past few days, we wish to emphasize that East Jerusalem remains part of the occupied Palestinian territory, in which International Humanitarian Law applies. The occupying Power must respect and cannot confiscate private property in occupied territory, and must respect, unless absolutely prevented, the laws in force in the country.”
He went on to note that Israel cannot impose its own set of laws in occupied territory, including East Jerusalem, to evict Palestinians from their homes.
On Thursday, Tor Wennesland, UN Special Coordinator for the Middle East Peace Process, also urged Israel to stop demolitions and evictions in the neighbourhood, in line with its obligations under international humanitarian law.
Prohibited under international law
“In addition, the Absentee Property Law and the Legal and Administrative Matters Law are applied in an inherently discriminatory manner, based solely on the nationality or origin of the owner”, OHCHR spokesperson Colville said.
“In practice, the implementation of these laws facilitates the transfer by Israel of its population into occupied East Jerusalem. The transfer of parts of an occupying Power’s civilian population into the territory that it occupies is prohibited under international humanitarian law and may amount to a war crime”, he added.
Violation of right to adequate housing
The OHCHR spokesperson also said that forced evictions could violate the rights to adequate housing and to privacy and other human rights of those who are evicted.
“Forced evictions are a key factor in creating a coercive environment that may lead to forcible transfer, which is prohibited by the Fourth Geneva Convention and is a grave breach of the Convention.”
Mr. Colville also called on Israel to respect freedom of expression and assembly, including of those who are protesting against the evictions, and to exercise maximum restraint in the use of force while ensuring safety and security in East Jerusalem.
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