Volatile prices limit potential of commodities markets
KATHMANDU: Taming volatile price shifts for crude oil and other raw materials that many developing countries export and depend on for economic growth will require a better mix of policies and market mechanisms by governments, producers, those involved in international financial and credit markets, and others, according to speakers at UNCTAD’s inaugural Global Commodities Forum this morning.
UNCTAD Secretary-General Supachai Panitchpakdi said over 85 developing countries depend on commodities for more than 50 per cent of their export earnings. The commodities boom that began in 2002 after more than two decades of declining prices raised hopes that such nations could reinvest climbing profits into reducing poverty and diversifying their economies, but the boom went bust as global recession struck in 2008.
The Forum will also address other pressing issues in the sector, including recent developments in the extractive industries; investment in improving the productive capacities of the commodities sector; options for mitigating
risks in commodities production and trade; commodity finance and related legal issues; and policy options for minerals and metals producers.
Jean Feyder, Ambassador of Luxembourg and President of UNCTAD’s Trade and Development Board, told the meeting that the Forum, or GCF, is intended to provide a neutral, high-level platform for reaching a convergence of views on price volatility.
Mohamed Saleh Al-Sada, Minister of State for Energy and Industry Affairs of Qatar, said the price of oil, despite the best efforts of the Organization of Petroleum Exporting Countries (OPEC) to stabilize it, tripled to over $145 per barrel in July 2008 and then fell to less than $40 per barrel six months later. Since then, prices had recovered to about $70-80 per barrel.
Germanico Pinto, Minister of Non-Renewable Natural Resources of Ecuador, and President of OPEC, said petroleum markets are enduring a period of great uncertainty.
Ali Mchumo, Managing Director of the Common Fund for Commodities (CFC), said the Fund now has 106 member countries, and its intent is to harvest stable development from commodities production and exports. The sector must be transformed to become a major contributor to poverty reduction.