In the course of a widely reported speech earlier this week, the Fed Reserve Chairman, Mr Ben Bernanke, forcefully made the point that the trend increase in demand for commodities is more than accounted for by developing economies.

That developing economies have been accounting for most of the growth in the consumption of commodities is an old story. But the striking point in the Fed Chairman's presentation is that demand for commodities has been declining in advanced economies; in relation to their GDP, certainly, but in absolute terms as well.

Oil consumption up

World oil consumption rose by 14 per cent from 2000 to 2010. Underlying this overall trend, however, was a 40 per cent increase in oil use in emerging market economies - and an outright decline of 4.5 per cent in the advanced economies.

This dramatic shift was even more striking for industrial metals, where double digit percentage rates of decline in consumption by the advanced economies over the past decade were offset by triple digit percentage increases in consumption by the emerging market economies.

That developing economies have to pay more and more seems only fair; they are the ones driving prices up in the first place.

But one can see why the whole thing seems so unfair when looked at from the point of view of an advanced economy which finds itself, like Alice in Wonderland, having to shell out more and more for consuming less and less.

Related Topics