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IMF Survey: Commodity Prices Slump, Less Appetite for Oil Amid Downturn

December 10, 2008

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

Commodity Prices Slump, Less Appetite for Oil Amid Downturn

World oil consumption is expected to decrease both this year and in 2009 (photo: Wally Moon/Jupiterimages)

Global Outlook

Commodity prices have declined sharply from recent peaks (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 weather-related 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 continuing through most of 2009, along with lower projected crude oil prices, the Energy Information Administration (EIA) projects the annual average retail gasoline price in the United States in 2009 to be $2.03 per gallon.

Decelerating activity along with the continued impact of rising oil prices earlier in the year have led to declining oil demand in the United States in 2008 (see Chart 3).

World oil consumption is also expected to decline this year, albeit only slightly—by about 49,000 barrels a day or 0.06 percent compared to an increase of 849,000 barrels a day or 1.0 percent in 2007. According to the EIA, world oil consumption is projected to decrease in 2009 by 449,000 barrels a day or 0.5 percent.

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