Oak Brook, Illinois: The boom in commodity prices, in which oil tripled and copper doubled in the past five years, probably will last another decade as economic growth in China and India continues at record pace, said Nariman Behravesh, chief economist at Global Insight Inc. a US-based financial and political consultancy firm.
China and India can sustain economic growth of 8-10% annually for at least the next 10 years, spurring demand for energy, metals, food and construction materials, Behravesh told natural gas traders on Tuesday.
Commodity prices have climbed since 2002 as economic growth in Asia outpaced expansions in mines, farms, oil fields and steel mills in North America, West Asia and Africa.
Any slump during the next several years will be temporary, Behravesh added.
“We’re looking at a demand boom that could go on for some time,” he said during a presentation at the LDC Forum, a conference on natural gas conference, in Oak Brook, a Chicago suburb in Illinois. “This high-price period is going to stay with us for another five or 10 years.”
Higher energy prices during the next decade probably won’t impede economic growth in the US—the world’s biggest market, because of efficiency measures instituted after the oil crises of the 1970s and 1980s, Behravesh said.
US households spend 3-4% of after-tax income on energy—down from 8% in 1980, he said. “Energy markets are less important to the economy than they were 20 or 30 years ago,” Behravesh added.
He estimated it will take another 5-10 years for high prices to spur enough new oil, metals and crop production to outpace demand and put a dent on prices.
“After that, enough supply will come online that prices will come down,” he said. “They won’t collapse but they’ll come down.”
Lead has been the best performing commodity, rising in price by six times in the past five years, according to the Rogers International Commodity Index, a composite, US dollar-based, total return index. Copper was second, followed by nickel.