Policy Responses to Commodity Price Movements — 2

B etween 1986 and 1998, the price of a barrel of West Texas Intermediate (WTI) oil remained quite stable, fluctuating between $16 and $42 constant 2011-U.S. dollars, with the exception of a brief spike in 1990 at the time of the first Gulf War. In December 1998, the barrel of WTI had reached a low point of $17. Almost 10 years later, in July 2008, the same barrel cost $134. By March 2009, the price of oil had plummeted back to $41, before inching its way back to $92 as of September 2012. These large swings have not been limited to oil prices. Other commodities have also experienced wild price fluctuations over the past 10 years. Such large commodity price movements have wide ranging macroeconomic implications in advanced and emerging economies alike.