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This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor. The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.

Petroleum products --- Wine --- Petroleum --- Petroleum industry and trade --- Prices. --- Prices --- Investments: Energy --- Finance: General --- Macroeconomics --- Agriculture: Aggregate Supply and Demand Analysis --- Nonrenewable Resources and Conservation: Other --- Energy: Demand and Supply --- Energy and the Macroeconomy --- Energy: General --- Commodity Markets --- General Financial Markets: General (includes Measurement and Data) --- Portfolio Choice --- Investment Decisions --- Investment & securities --- Finance --- Oil --- Commodity prices --- Oil prices --- Emerging and frontier financial markets --- Excess liquidity --- Commodities --- Financial markets --- Asset and liability management --- Financial services industry --- Liquidity --- Economics --- United States