In the past few days, global commodity prices for oil, grain and other commodities have retreated from their new record highs. The price of oil, which reached a new record of $111.80 a barrel on Monday dropped below $100 a barrel this morning.  Similarly, prices for wheat and soybeans have also fallen in the past few days.

If the U.S. has fallen into a recession and the global economy slows down, commodity prices are likely to fall even further in the weeks and months ahead.  In times past, economic downturns have always cooled off commodity prices, but until this week global commodity prices have appeared to defy economic “gravity”, by rising at a time when demand should be falling.

Commodity prices have risen so far and so fast in the past year that some analysts are worried that demand is confronting an inelastic supply curve, meaning that suppliers simply can’t keep up with rising demand.  Oil producers, in other words, simply cannot—in the short-term at least—produce any more oil.  Farmers—despite record grain prices last year—cannot boost grain production fast enough in 2008 to meet rising consumer demand.

A growing number of analysts, in fact, fear that—unless there is a major economic downturn—demand for oil, grain and other commodities will continue to outpace supply for years to come, leading to higher and higher prices and a growing risk that the world’s poor will not be able to keep up.

If demand for commodities is growing too fast, what’s the problem?  Is it global population growth?  Or is it rising living standards? 

Moises Naim, the editor in chief of Foreign Policy, wrote a column this month (“Can the World Afford a Middle Class?”) that explores this question:

The middle class in poor countries is the fastest-growing segment of the world’s population. While the total population of the planet will increase by about 1 billion people in the next 12 years, the ranks of the middle class will swell by as many as 1.8 billion. Of these new members of the middle class, 600 million will be in China. Homi Kharas, a researcher at the Brookings Institution, estimates that by 2020 the world’s middle class will grow to include a staggering 52 percent of the global population, up from 30 percent now. The middle class will almost double in the poor countries where sustained economic growth is lifting people above the poverty line fast. For example, by 2025, China will have the world’s largest middle class, while India’s will be 10 times larger than it is today.

Naim says that this rising middle class is feeding the world’s appetite for fuel and meat, which, in turn, is putting pressure on the world grain markets, as more and more grain is being used to produce food or feed cattle.  He warns that this competition for resources will lead to “dislocations” that are “painful and difficult to predict.”  He concludes:

The debate about the Earth’s “limits to growth” is as old as Thomas Malthus’s alarm about a world where the population outstrips its ability to feed itself. In the past, pessimists have been proven wrong. Higher prices and new technologies, like the green revolution, always came to the rescue, boosting supplies and allowing the world to continue to grow. That may happen again. But the adjustment to a middle class greater than what the world has ever known is just beginning. As the Indonesian and Mexican protesters can attest, it won’t be cheap. And it won’t be quiet.

Naim’s article is a valuable contribution to the debate about global resources and possible “limits to growth.”  It’s a debate that policymakers in Washington and around the world should be having…right now.

My fear, however, is that a global economic downturn will eclipse this debate.  Commodity prices will fall and policymakers will assume that global resources are still limitless and the potential for growth still unlimited.  Then, a year or two from now, when the global economy recovers and commodity prices resume their meteoric rise, policymakers will scratch their collective heads and ask “What’s the problem?”