A report being conducted for the world’s Group of 20 leading economies points to supply not keeping up with demand as the main factor behind price increases in wheat, sugar, cotton, metals, oil and other commodities.
The Organization for Economic Cooperation and Development’s study–which is being put together ahead of the next G-20 meeting of top finance officials in April in Washington– may lead to increased efforts to boost commodities production around the world. It could also help reduce criticism of the U.S. Federal Reserve’s easy-money policies, which some have blamed for stoking global inflation.
French President Nicholas Sarkozy, who heads the G-20, recently warned that rising commodity prices were a threat to the world economy. Finance ministers and central bankers meeting in Paris a week ago said they’d look into the underlying drivers of the price increases and consider possible actions.
“It’s very hard to distinguish between financial and structural factors behind the price increases, but it looks like demand and supply are playing the predominant role,” Pier Carlo Padoan, chief economist and deputy-secretary general at the OECD, said in an interview.
A drought and fire in Russia last summer, coupled with export restrictions imposed by the government there, helped bring about soaring wheat prices. Meanwhile, bad harvests in the U.S., Europe, Australia and Argentina have contributed to soaring agricultural commodity prices on international markets.
There have been few investments in agriculture over the past few years and productivity has been stagnant, the OECD report is expected to highlight. At the same time, demand for food has been growing in China and India, the world’s two most populous countries, as their economies continue to grow at a rapid pace.
A similar supply and demand argument can be made for oil prices, Padoan said. Oil prices have recently surged above $100 a barrel amid concerns that the recent turmoil in the oil-rich North African and Middle Eastern countries could hit production. The price of Brent oil, considered the best benchmark, is close to $110 a barrel, 15% higher than at the start of the year.
Fed Chairman Ben Bernanke has been making a similar case about commodity prices, following strong criticism that the U.S. central bank’s pumping of dollars has sent floods of cash into China and other developing economies, driving up prices for food and energy. The Fed chief puts the blame on strong growth in developing economies and their inadequate response, including China’s reluctance to let its currency rise.
At the last meeting of G-20 world leaders last November, which took place just a week after the Fed announced it would inject $600 billion into the economy to buy government bonds, U.S. President Barack Obama was challenged to defend the policy from foreign accusations that the U.S. was stoking inflation. The criticism overshadowed Obama’s priority for the summit: greater pressure on China to revalue its currency. Before G-20 leaders convene again in November, the spotlight could be back on China.
Source: http://blogs.wsj.com
The Organization for Economic Cooperation and Development’s study–which is being put together ahead of the next G-20 meeting of top finance officials in April in Washington– may lead to increased efforts to boost commodities production around the world. It could also help reduce criticism of the U.S. Federal Reserve’s easy-money policies, which some have blamed for stoking global inflation.
French President Nicholas Sarkozy, who heads the G-20, recently warned that rising commodity prices were a threat to the world economy. Finance ministers and central bankers meeting in Paris a week ago said they’d look into the underlying drivers of the price increases and consider possible actions.
“It’s very hard to distinguish between financial and structural factors behind the price increases, but it looks like demand and supply are playing the predominant role,” Pier Carlo Padoan, chief economist and deputy-secretary general at the OECD, said in an interview.
A drought and fire in Russia last summer, coupled with export restrictions imposed by the government there, helped bring about soaring wheat prices. Meanwhile, bad harvests in the U.S., Europe, Australia and Argentina have contributed to soaring agricultural commodity prices on international markets.
There have been few investments in agriculture over the past few years and productivity has been stagnant, the OECD report is expected to highlight. At the same time, demand for food has been growing in China and India, the world’s two most populous countries, as their economies continue to grow at a rapid pace.
A similar supply and demand argument can be made for oil prices, Padoan said. Oil prices have recently surged above $100 a barrel amid concerns that the recent turmoil in the oil-rich North African and Middle Eastern countries could hit production. The price of Brent oil, considered the best benchmark, is close to $110 a barrel, 15% higher than at the start of the year.
Fed Chairman Ben Bernanke has been making a similar case about commodity prices, following strong criticism that the U.S. central bank’s pumping of dollars has sent floods of cash into China and other developing economies, driving up prices for food and energy. The Fed chief puts the blame on strong growth in developing economies and their inadequate response, including China’s reluctance to let its currency rise.
At the last meeting of G-20 world leaders last November, which took place just a week after the Fed announced it would inject $600 billion into the economy to buy government bonds, U.S. President Barack Obama was challenged to defend the policy from foreign accusations that the U.S. was stoking inflation. The criticism overshadowed Obama’s priority for the summit: greater pressure on China to revalue its currency. Before G-20 leaders convene again in November, the spotlight could be back on China.
Source: http://blogs.wsj.com
No comments:
Post a Comment