Price formation and price trends in
exhaustible resource markets: Evidence
Professor of Economics
Luleå University of Technology
MarianCUTS 22 Sept 2011
Themes covered by paper
(Themes also covered by talk)
ØThe long run price equilibrium: Why is it falling?
ØThe anatomy of resource booms
Ø”Speculation” and resource prices: What do we know about
ØMonopolistic management of exhaustible resource markets
ØNational dependence on exhaustible resource production
and trade: The Dutch Disease and the Resource Curse
Short run price determination Long run price determination
Q1 Q2 Q3 Q Q1 Q2 Q
”Developing Asia” dominates the
growth of commodity demand
Developing Asia OECD
Share of global BNP 24% 52%
Assumed marginal raw materials intensity 2 1
With the same economic growth rates, both regions will contribute equally
to commodiy demand expansion.
But economic growth in Dev Asia 2001-2010 was 5.3 times the growth rate in
Conclusion: Dev Asia’s contribution to global commodity demand expansion
was five times as high as that of the OECD.
During the acute phase of the financial crisis, 2008-2010, the OECD
economies expanded by -0.1%/year; those in Dev Asia by 8.1%/year.
The crisis and stagnation in the OECD region has had an imperceptible
impact on commodity demand. That explains price recovery as aoon as it
became clear that Dev Asia would remain unaffected by the crisis.
Commodity prices, monthly $ index, 2003=100
Markets with futures Markets without futures