Commodity prices rebound

Click for bigger graph

Oil prices rebounded but are unlikely to return to pre-crisis peak levels.

While oil prices stand about 50% below their July 2008 peak they significantly rebounded in recent months, with the price of Brent having risen by 75% between December 2008 and mid June. Falling oil supply was a major factor behind this development, with OPEC crude oil production in the first quarter 2009 having recorded the largest fall in 20 years. More recently, market sentiment that the slump in economic activity might bottom out soon and stronger Chinese crude oil imports, which increased by almost 40%, not seasonally adjusted, between February and March 2009, might also have played a role. While this may largely reflect restocking of strategic reserves at a period of relatively low crude oil prices, it also hints at some firming in Chinese economic activity in the near term.

The projections presented here are based on the usual technical assumption that the Brent price stays close to its level before the cut-off date for information, in this case $65 per barrel. But there are also some substantive arguments backing this assumption. Thus, relatively high spare capacity and crude oil inventories as well as subdued oil demand on account of weak macro-economic activity will contribute to keeping oil prices significantly below the elevated levels witnessed in the recent past. Moreover, conditional on the economic growth projections in this Economic Outlook, a simple model of demand and supply for oil, calibrated with reasonable values for price and income elasticities, suggests a price of around $50 and $55 per barrel Brent for this year and next, respectively (see graph). However, with high oil price volatility and considerable uncertainty about supply and demand actual oil price developments are subject to a large degree of uncertainty. In particular, there is a considerable risk that rising oil demand outside the OECD area, notably from China, in combination with OPEC supply restraint could put further upward pressure on prices. In addition, analysis by the International Energy Agency suggests that project delays will remain a major factor restraining oil supply in the medium term. More recent information suggests that project cancellations and slippage in upstream spending levels for 2009 appear to be increasing due to relatively low oil prices. Indeed, the oil futures curve suggests further price increases over the next two years. However, the predictive power of oil futures for spot prices is notoriously low.

Non-oil commodity prices have also increased

The downturn in world economic growth and more favourable seasonal conditions for agricultural production have also led to large falls in prices for minerals, ores and metals and for agricultural raw materials and food, respectively, from their peak levels in spring and summer 2008. However, prices for all important industrial metals have bottomed out and most of them have posted strong gains over recent months. Again, this recovery is in part attributable to rising Chinese imports, which for some metals reached record levels in March. Food prices have rebounded as well, reflecting strong Chinese import demand for grains, weather concerns and planting delays. Prices for non-oil commodities are assumed to stabilise around current levels. However the risk distribution appears to be skewed to the upside.


IEA (2008), Medium-term Oil Market Report, Paris

OECD (2009), OECD Economic Outlook, No 85, June

Wurzel, E., L. Willard and P. Ollivaud (2009), "Up and Down on the Oil Price Curve-Forces and Policy Issues", OECD Economics Department Working Papers, forthcoming.

For more on the latest OECD Economic Outlook, you can go to or order them at

©L'Observateur de l'OCDE n° 274, juillet 2009

Economic data


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly

Online edition
Previous editions

Don't miss

  • How do the largest community of British expats living in Spain feel about Brexit? Britons living in Orihuela Costa, Alicante give their views.
  • Brexit is taking up Europe's energy and focus, according to OECD Secretary-General Angel Gurría. Watch video.
  • OECD Chief Economist Catherine Mann and former Bank of England Governor Mervyn King discuss the economic merits of a US border adjustment tax and the outlook for US economic growth.
  • OECD Secretary-General Angel Gurría discusses the uncertainty in politics around the world, lack of proper skills for future jobs, global growth and US-Mexico relations.
  • Green Talks on 3D printing: 3D printing may be growing rapidly and innovations abound, but what does this mean for the environment? Click on the picture to join Shardul Agrawala of the OECD Environment Directorate on 27 February at 13:00 CET to discuss the potential benefits and drawbacks of widespread 3D printing.
  • How should pension systems account for gender differences and deliver equitable pensions for women and men? Do differences in financial literacy between men and women impact their long-term well-being? These are some of the questions to be debated at an OECD-hosted conference taking place on International Women’s Day, 8 March 2017.
  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • OECD Environment Director Simon Upton presented a talk at Imperial College London on 21 April 2016. With the world awash in surplus oil and prices languishing around US$40 per barrel, how can governments step up efforts to transform the world’s energy systems in line with the Paris Agreement?
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Once migrants reach Europe, countries face integration challenge: OECD's Thomas Liebig speaks to NPR's Audie Cornish.

  • The carbon clock is ticking: OECD’s Gurría on CNBC

  • If we want to reach zero net emissions by the end of the century, we must align our policies for a low-carbon economy, put a price on carbon everywhere, spend less subsidising fossil fuels and invest more in clean energy. OECD at #COP21 – OECD statement for #COP21
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2017