Commodity Prices Slump, Less Appetite for Oil Amid Downturn

• Pages: 193

Page 193

Commodity prices have declined sharply from recent peaks on expectations of a sharp global downturn, as demand for commodities has weakened in tandem with world economic activity.

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Commodity prices have plummeted in recent weeks (see Chart 1). The current global downturn has led to a decrease in global energy demand and a concomitant fall in energy prices. Energy prices have dropped at least 40 percent from their peak in July 2008.

Food prices, which were pushed up by a combination of rising demand and weatherrelated supply shocks, have also seen a sharp drop. They are down by 27 percent from their record high in June 2008.

The average U.S. retail price for regular- grade gasoline-at $2.15 per gallon in November-is more than $1.90 per gallon below its high in mid-July 2008 (see Chart 2).

With a weak economy expected to continue through most of 2009, along with lower crude oil prices, the Energy Information Administration (EIA) projects the annual average...