Placing the 2006/08 Commodity Price Boom into Perspective

Baffes, John; Haniotis, Tassos

dc.creator	Baffes, John
dc.creator	Haniotis, Tassos
dc.date	2012-03-19T18:41:01Z
dc.date	2012-03-19T18:41:01Z
dc.date	2010-07-01
dc.date.accessioned	2023-02-17T21:04:47Z
dc.date.available	2023-02-17T21:04:47Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100721110120
dc.identifier	http://hdl.handle.net/10986/3855
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/244819
dc.description	The 2006-08 commodity price boom was one of the longest and broadest of the post-World War II period. Apart from strong and sustained economic growth, the recent boom was fueled by numerous factors, including low past investment in extractive commodities, weak dollar, fiscal expansion, and lax monetary policy in many countries, and investment fund activity. At the same time, the combination of adverse weather conditions, the diversion of some food commodities to the production of biofuels, and government policies (including export bans and prohibitive taxes) brought global stocks of many food commodities down to levels not seen since the early 1970s. This in turn accelerated the price increases that eventually led to the 2008 rally. The weakening and/or reversal of these factors coupled with the financial crisis that erupted in September 2008 and the subsequent global economic downturn, induced sharp price declines across most commodity sectors. Yet, the main price indices are still twice as high compared to their 2000 real levels, begging once more the question about the real factors affecting them. This paper concludes that a stronger link between energy and non-energy commodity prices is likely to be the dominant influence on developments in commodity, and especially food, markets. Demand by emerging economies is unlikely to put additional pressure on the prices of food commodities. The paper also argues that the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors (the so-called "financialization of commodities") may have been partly responsible for the 2007/08 spike. Finally, econometric analysis of the long-term evolution of commodity prices supports the thesis that price variability overwhelms price trends.
dc.language	English
dc.relation	Policy Research working paper ; no. WPS 5371
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	AGRICULTURAL COMMODITIES
dc.subject	AGRICULTURAL COMMODITY
dc.subject	AGRICULTURAL PRICE
dc.subject	AGRICULTURAL PRICES
dc.subject	APPROACH
dc.subject	ASSET MANAGERS
dc.subject	ASSET PRICES
dc.subject	AVAILABILITY
dc.subject	AVERAGE PRICE
dc.subject	BACKBONE
dc.subject	BANDWIDTH
dc.subject	BARRELS PER DAY
dc.subject	BARTER
dc.subject	BUFFER STOCKS
dc.subject	CENTRAL BANK
dc.subject	CEREAL PRICES
dc.subject	COFFEE PRICES
dc.subject	COMMERCE
dc.subject	COMMERCIAL ACTIVITY
dc.subject	COMMERCIAL BANK
dc.subject	COMMODITIES
dc.subject	COMMODITY
dc.subject	COMMODITY BOOM
dc.subject	COMMODITY BOOMS
dc.subject	COMMODITY EXCHANGES
dc.subject	COMMODITY FUTURES
dc.subject	COMMODITY INDEX
dc.subject	COMMODITY MARKET
dc.subject	COMMODITY MARKETS
dc.subject	COMMODITY PRICE
dc.subject	COMMODITY PRICE INDEX
dc.subject	COMMODITY PRICE INDICES
dc.subject	COMMODITY PRICES
dc.subject	COMMODITY PRODUCERS
dc.subject	COMMODITY SECTORS
dc.subject	COMMODITY TRADING
dc.subject	COTTON PRICES
dc.subject	CRUDE OIL
dc.subject	CRUDE OIL PRICE
dc.subject	CURRENCY
dc.subject	DEBT
dc.subject	DEMAND GROWTH
dc.subject	DEVELOPING COUNTRIES
dc.subject	DEVELOPING COUNTRY
dc.subject	DIVERSIFICATION BENEFITS
dc.subject	DOMESTIC MARKETS
dc.subject	ECONOMIC ACTIVITY
dc.subject	ECONOMIC COOPERATION
dc.subject	ECONOMIC CRISIS
dc.subject	ECONOMIC DEVELOPMENT
dc.subject	ECONOMIC DOWNTURN
dc.subject	EFFICIENT MARKET
dc.subject	EMERGING ECONOMIES
dc.subject	ENERGY MARKETS
dc.subject	ENERGY PRICE
dc.subject	ENERGY PRICES
dc.subject	ENVIRONMENTAL BENEFITS
dc.subject	EQUILIBRIUM PRICE
dc.subject	EQUITIES
dc.subject	ETHANOL
dc.subject	ETHANOL PRODUCTION
dc.subject	EXCESS LIQUIDITY
dc.subject	EXCHANGE MARKET
dc.subject	EXCHANGE MARKETS
dc.subject	EXCHANGE RATE
dc.subject	EXCHANGE RATES
dc.subject	EXPENDITURES
dc.subject	FEEDSTOCK
dc.subject	FEEDSTOCKS
dc.subject	FINANCIAL CRISIS
dc.subject	FINANCIAL INSTITUTIONS
dc.subject	FINANCIAL MARKETS
dc.subject	FINANCIAL TRANSACTIONS
dc.subject	FOOD COMMODITIES
dc.subject	FOOD COMMODITY
dc.subject	FOOD PRICE
dc.subject	FOOD PRICES
dc.subject	FOSSIL
dc.subject	FOSSIL FUEL
dc.subject	FOSSIL FUEL USE
dc.subject	FUEL
dc.subject	FUEL CONSUMPTION
dc.subject	FUEL PRODUCTION
dc.subject	FUND MANAGERS
dc.subject	FUTURE PRICE
dc.subject	FUTURES
dc.subject	FUTURES CONTRACT
dc.subject	FUTURES MARKET
dc.subject	FUTURES MARKETS
dc.subject	FUTURES TRADING
dc.subject	GAS COMPANIES
dc.subject	GASOLINE
dc.subject	GASOLINE PRICES
dc.subject	GLOBAL ECONOMIC PROSPECTS
dc.subject	GLOBAL ECONOMY
dc.subject	GLOBALIZATION
dc.subject	GOVERNMENT INTERVENTION
dc.subject	GOVERNMENT POLICIES
dc.subject	GREENHOUSE GASES
dc.subject	GROWTH RATES
dc.subject	HEDGE FUND
dc.subject	HEDGE FUNDS
dc.subject	HEDGING
dc.subject	HIGH ENERGY INTENSITY
dc.subject	INCOME
dc.subject	INCOMES
dc.subject	INFLATION
dc.subject	INSURANCE
dc.subject	INTEREST RATE
dc.subject	INTEREST RATES
dc.subject	INTERNATIONAL COCOA AGREEMENT
dc.subject	INTERNATIONAL COMMODITY AGREEMENTS
dc.subject	INVENTORIES
dc.subject	INVESTMENT PORTFOLIOS
dc.subject	INVESTMENT VEHICLE
dc.subject	INVESTMENT VEHICLES
dc.subject	INVISIBLE HAND
dc.subject	LIMITS TO GROWTH
dc.subject	LIQUID ASSETS
dc.subject	MANUFACTURING
dc.subject	MARKET CONDITIONS
dc.subject	MARKET DEVELOPMENTS
dc.subject	MARKET EFFICIENCY
dc.subject	MARKET FAILURE
dc.subject	MARKET INEFFICIENCIES
dc.subject	MARKET INTEGRATION
dc.subject	MARKET MANIPULATION
dc.subject	MARKET PRICE
dc.subject	MARKET PRICES
dc.subject	MARKET VOLATILITY
dc.subject	MARKETING
dc.subject	MONETARY POLICY
dc.subject	NATURAL GAS
dc.subject	NEW TECHNOLOGY
dc.subject	NITROGEN
dc.subject	NITROGEN FERTILIZER
dc.subject	OIL MARKETS
dc.subject	OIL PRICES
dc.subject	OIL PRODUCTION
dc.subject	OIL SHOCKS
dc.subject	OIL SPILLS
dc.subject	OILS
dc.subject	OUTPUT
dc.subject	OUTPUTS
dc.subject	PDF
dc.subject	PENSION
dc.subject	PENSION FUNDS
dc.subject	PETROLEUM
dc.subject	PETROLEUM PRICES
dc.subject	PORTFOLIO
dc.subject	PORTFOLIOS
dc.subject	PRICE BEHAVIOR
dc.subject	PRICE CHANGES
dc.subject	PRICE DISCOVERY
dc.subject	PRICE FORECAST
dc.subject	PRICE INCREASE
dc.subject	PRICE INCREASES
dc.subject	PRICE INDEX
dc.subject	PRICE INDICES
dc.subject	PRICE LEVELS
dc.subject	PRICE MOVEMENTS
dc.subject	PRICE OF OIL
dc.subject	PRICE SERIES
dc.subject	PRICE SPIKES
dc.subject	PRICE STABILIZATION
dc.subject	PRICE TRENDS
dc.subject	PRICE VOLATILITY
dc.subject	PRICES OF ENERGY
dc.subject	PRIMARY COMMODITIES
dc.subject	PRIMARY COMMODITY
dc.subject	PRODUCTION OF ETHANOL
dc.subject	PRODUCTIVITY
dc.subject	PUBLIC POLICY
dc.subject	R&D
dc.subject	RAW MATERIALS
dc.subject	REAL ESTATE
dc.subject	RENEWABLE ENERGY
dc.subject	RESULT
dc.subject	RESULTS
dc.subject	RETAIL
dc.subject	SEARCH
dc.subject	SECURITIES
dc.subject	SECURITY CONCERNS
dc.subject	SOYBEAN OIL
dc.subject	SPECULATIVE BUBBLE
dc.subject	SPOT PRICE
dc.subject	SPREAD
dc.subject	STOCKS
dc.subject	STORAGE FACILITIES
dc.subject	SUBSTITUTE
dc.subject	SUPPLY SHOCKS
dc.subject	TARGETS
dc.subject	TIME PERIOD
dc.subject	TRADING ACTIVITIES
dc.subject	TRANSACTION
dc.subject	TRANSMISSION
dc.subject	USES
dc.subject	VOLATILITY
dc.subject	WEB
dc.subject	WEBLOG
dc.subject	WORLD ECONOMY
dc.subject	WORLD MARKET
dc.subject	WORLD TRADE
dc.title	Placing the 2006/08 Commodity Price Boom into Perspective
dc.type	Publications & Research :: Policy Research Working Paper
dc.coverage	The World Region
dc.coverage	The World Region