1. Professor of Economics Luleå University of Technology
Price formation and price trends in exhaustible resource markets: Evidence and explanations By
Marian Radetzki
Professor of Economics
Luleå University of Technology
MarianCUTS 22 Sept 2011

2. Themes covered by paper (Themes also covered by talk)
The long run price equilibrium: Why is it falling?
The anatomy of resource booms
”Speculation” and resource prices: What do we know about the relationship?
Monopolistic management of exhaustible resource markets
National dependence on exhaustible resource production and trade: The Dutch Disease and the Resource Curse

3. Short run price determination Long run price determinationQ1 Q2 Q3 Q Q1 Q2 Q

4. ”Developing Asia” dominates the growth of commodity demand
Developing Asia OECD
Share of global BNP % %
Assumed marginal raw materials intensity
With the same economic growth rates, both regions will contribute equally to commodiy demand expansion.
But economic growth in Dev Asia was 5.3 times the growth rate in OECD.
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, , 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.

5. Commodity prices, monthly $ index, 2003=100
Markets with futures Markets without futures
Source: IMF.