nova Price Indices (June 2021)

Developments of raw material prices over time

This chart developed by experts from the nova-Institute shows the price development of commodities since 1980. The raw materials have been divided into three different price indices depending on their type. The index for fossil raw materials, for example, shows the price development of oil and gas, the biomass index does the same for the main biogenic resources from agriculture and forestry.

If we look at the development of the price curves over the entire period, we see that their graphs are very similar and relatively parallel to each other. It can also be observed that the price levels of the indices are relatively similar by the year 2000.

After that year, however, the price index for fossil commodities recorded a massive increase and decoupled from the other raw materials. This is due to the worldwide increase in oil consumption, which was mainly driven by China. China has risen to become the second-largest oil consumer in the world. At the same time, this increased demand could not be met to the same extent by increases in production, so that the prices for fossil raw materials rose significantly. In 2008, the global financial crisis and the resulting economic uncertainty led to a decline in demand for oil and oil products, which in turn caused prices to fall.

A similar development occurred last year due to the effects of the Covid-19 pandemic. The resulting recession had an extremely negative impact on the global economy. In the chart, this can be seen particularly in the collapse of the fossil commodities curve in 2020. However, it is also interesting to note that the sharp rise in the price level of metals continued and was not affected by the pandemic. Currently, the positive outlook for the near end of the pandemic is slowly increasing demand for crude oil again. However, this is contrasted by the decision of OPEC and its plus partners to further curb their oil production. As a result, the market is undersupplied and prices are rising and the prices of fossil raw material show a much higher increase than the prices for biomass, which are stable so far.

Author

Olaf Porc

Source

nova-Institute, press release, 2021-07-01.

Supplier

nova-Institut GmbH

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