What's Up -- or Down -- With Commodity Prices?

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This is the VOA Special English ECONOMICS REPORT.

Prices for many widely traded goods have fallen recently after big increases earlier in the year.

Oil, the world's most widely traded commodity by value, led the way. Oil prices fell in part because of a recently stronger dollar. Most oil is traded in dollars. When the dollar's exchange value increases, so do prices in foreign currencies.

Higher prices, in turn, reduce demand. For example, officials say Americans drove fifteen and a half billion fewer kilometers in May than a year before.

Lower prices are welcome news for buyers. But experts say the drop in demand for oil and other raw materials is also a sign of weakening economies in Europe and Japan. Recent economic reports suggest that they may be in a worse position than the United States.

The Economist magazine's index of commodity prices excluding oil fell by more than twelve percent since early July.

But this week, commodities have been trading higher -- especially on Thursday as oil prices jumped. Market watchers blamed tensions between the United States and Russia, the world's second largest oil exporter, as well as a weaker dollar.

Investors sold dollars and moved back into gold and other precious metals along with energy and agriculture futures. A Reuters news agency index showed commodities moving toward their biggest weekly gain in thirty-three years.

Oil hit an all-time high of one hundred forty-seven dollars and twenty-seven cents a barrel on July eleventh. Before Thursday's rise it was trading below one hundred twenty dollars a barrel.

Which way oil prices will go now is anyone's guess, but the recent drop has helped ease inflation fears. Consumer prices in the United States rose in July at their fastest level in seventeen years. Producer prices rose at their fastest rate in twenty-seven years.

Along with oil, prices for agricultural commodities have fallen recently. The effects, though, may be slow to bring down food prices.

Prices for most grains have fallen by twenty to thirty percent or more since the end of June.

One reason was good news from the Midwest, the agricultural heartland in the United States. Heavy rains in May and June caused the worst flooding there in fifteen years. But this month, the Department of Agriculture added about five percent to its latest estimate for this year's corn crop. The crop is expected to be the second largest ever.

And that's the VOA Special English ECONOMICS REPORT, written by Mario Ritter. I'm Steve Ember.

Voice of America Special English

Source: What's Up -- or Down -- With Commodity Prices?
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