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Oil spills on other commodities
 
Author:Baffes, John ; Country:World;
Date Stored:2007/08/28Document Date:2007/08/01
Document Type:Policy Research Working PaperSubTopics:Energy Production and Transportation; Markets and Market Access; Emerging Markets; Commodities; E-Business
Language:EnglishRegion:The World Region
Report Number:WPS4333Volume No:1 of 1

Summary: This paper examines the effect of crude oil prices on the prices of 35 internationally traded primary commodities for the 1960-2005 period. It finds that the pass-through of crude oil price changes to the overall non-energy commodity index is 0.16. At a more disaggregated level, the fertilizer index had the highest pass-through (0.33), followed by agriculture (0.17), and metals (0.11). The prices of precious metals also exhibited a strong response to the crude oil price. In terms of individual commodities, the estimates of the food group exhibited remarkable similarity while those of raw materials and metals gave a mixed picture. The implication is that if crude oil prices remain high for some time, as most analysts expect, then the recent commodity price boom is likely to last much longer than earlier booms, at least for food commodities. The other commodities, however, are likely to follow diverging paths. On the methodological side, the results show that price indices, while providing useful summary statistics, need to be supplemented by individual commodity analysis.

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