While the supply responses might be shorter in some sectors such as agriculture, for major energy projects the gestation period can be as long as 10 or 15 years. Eventually, though, demand and supply adjust – in many cases taking prices back to where they started.
This is what economists often refer to as “mean reversion.” What about the significant price increases we’ve seen since 2002? Although mean reversion is frequently observed in the very long run, commodity prices can also experience large and persistent swings over 5-, 10- and even 20-year periods.