Recent volatility in commodity prices, along with renewed concerns about energy and food security, has brought fresh attention to commodity supply management. Many of today’s proposals—for energy, metals, and food products—echo earlier appeals to establish international commodity agreements (ICAs). While targeted, temporary interventions can mitigate acute supply disruptions, long-term price management schemes have a poor track record. As policymakers consider such proposals, history urges caution.
Over the 20th century, nearly 30 ICAs were created, spanning a range of non-energy commodities. These included metals (such as copper and tin), agricultural raw materials (including natural rubber and wool), food commodities (such as wheat and sugar), and beverage commodities (such as cocoa and coffee). The agreements had various objectives, including managing excess supply, reducing export-revenue volatility, stabilizing (and sometimes raising) prices, and ensuring adequate supply for strategic purposes—such as wool for Allied uniforms during the two World Wars. Most agreements ultimately collapsed while some ended after achieving their limited objectives. Their policy tools ranged from inventory management (buffer stocks) to export and import controls and production quotas. Agreements formed before World War II typically included only producers, while those negotiated afterward brought together both exporters and importers. On average, postwar agreements covered about 65 percent of global production of their target commodities.
Nearly a century of experience with non-oil commodity agreements highlights a central lesson: markets adjust faster than institutions can manage them. Many ICAs were ultimately undermined by the very outcomes they themselves created. When agreements succeeded in stabilizing or lifting prices, they stimulated innovation and production outside the arrangements, incentivized quota violations and prompted consumers to switch to substitute products. These dynamics exerted pressure on markets and ultimately caused the collapse of many agreements, including those for coffee, natural rubber, and tin. Meanwhile, efforts to enforce price bands through stockpiling exposed the financial and logistical limits of resisting fundamental market forces. These challenges were particularly acute in postwar agreements that sought to balance producer and consumer interests but struggled to deliver sustained price stability.
Oil markets also have a long and distinct history of intervention. Since the first commercial discoveries in Pennsylvania in the mid-19th-century, producers have repeatedly tried to manage excess supply—through the Oil Creek Association, Standard Oil (broken up by U.S. antitrust laws in 1911), the multinational “Seven Sisters,” and the U.S. Texas Railroad Commission. As U.S. surplus capacity eroded by the early 1970s, those arrangements waned, and the Organization of the Petroleum Exporting Countries (OPEC) emerged as the dominant force in global oil markets. Founded in 1960, OPEC remains the only commodity-management arrangement still operating today.
Although OPEC has outlasted other commodity agreements, it faces many of the same pressures. Its resilience stems from adaptation—shifting from fixed to market-based pricing, adjusting production more flexibly, and expanding cooperation through OPEC+ in 2016, whose members now produce over half of global oil. Yet OPEC confronts rising competition and shifting demand. The price surges of the 1970s spurred new production in Alaska, the Gulf of Mexico, and the North Sea in the 1980s, while tempering demand growth. The post-2000 price boom catalyzed the rise of U.S. shale oil and accelerated Canadian oil sands and bitumen in the 2010s. Meanwhile, long-term structural trends – declining oil intensity of GDP and oil’s shrinking share of global energy consumption—have eroded OPEC’s influence. Managing production amid stagnant or declining demand will become increasingly challenging.
Despite ICAs weak long-term record, coordinated international action remains valuable in times of crisis. During the COVID-19 pandemic, for example, OPEC+ production cuts—alongside voluntary reductions by other producers—helped stabilize oil prices during an unprecedented collapse in demand. On the consumer side, strategic inventories have cushioned short-term supply disruptions. In food markets, well-designed strategic grain reserves can support crisis response and emergency preparedness, though they are most effective when used for short-term stabilization rather than long-term price control. Knowledge sharing and data transparency during periods of stress can also help reduce uncertainty and guide policy decisions.
Renewed calls for sustained market intervention to address price volatility and food and energy security warrant caution. Temporary, targeted measures during acute disruptions can help moderate volatility, but long-term attempts at price management rarely succeed. More durable stability comes from strengthening market resilience—diversifying production and consumption, encouraging innovation and investment, promoting transparency, and relying on market-based pricing. These tools offer more lasting protection against commodity price volatility than efforts to manage prices and markets directly.
Source: The World Bank Group
