Not just oil: Are lower commodities here to stay?

Oil isn't the only commodity that's gotten cheaper. From nickel to soybean oil, plywood to sugar, global commodity prices have been on a steady decline as the world's economy has lost momentum. That lower demand helps explain, in part, why nearly everything from crude oil to cotton has been getting cheaper. Sure, some commodity prices are rising. Local supply constraints have pushed prices higher in some parts of the world; transportation costs can also have a big impact on local prices. In the U.S., for example, a drought in California caused the price of vegetables and other food products to spike last year. Prices are also rising for some commodities, especially meats such as beef and chicken, thanks to growing demand from an expanding middle class in the developing world.

Read More Oil's plunging-why hasn't gasoline fallen faster? But the global cost of most commodities has been on a long-term, downward trend since the Great Recession. The chart below is based on global prices, in dollars, assembled by the World Bank.

Now, as much of the world slogs through a faltering recovery, there are fears that falling prices in slow-moving economies such as Europe and Japan could spark and extended period of deflation, when the consumer prices of finished goods fall over an extended period.

Deflation can be difficult to reverse if businesses and consumers start to cut back on spending and investment, waiting for prices to fall further, setting off an economic contraction that can deepen.

European central bankers are scrambling to avoid that amid signs that prices in the euro zone have all but flattened. On Monday, the latest data showed that German inflation slowed to its lowest level in over five years in December; prices inched up at an annual rate of just one-tenth of one percent, down from 0.5 percent in November.

A widely watched inflation index of the entire euro zone is due out Wednesday. Some analysts think it could show a negative reading for the first time since October 2009.

Read More Price plunge puts oil patch jobs at risk Much of the downward pressure is coming from oil prices, which have plunged since July as producers have flooded the world with oil. Unlike past price plunges that have prompted cutbacks by OPEC producers, the cartel has vowed to keep pumping.

The oil price crash has rattled investors this week. But some analysts say the price break is good news for a global economy struggling to gain momentum. "There's good deflation and bad deflation," said David Kelly, chief global strategist at J.P. Morgan Funds. "Lower oil prices are a clear positive for the U.S. economy, for the Chinese economy and the European economy. This stimulates the economy's growth; it doesn't depress it." It's far from clear how much further prices will fall, and where they'll stabilize in the long run. Kelly is among those who expect lower oil prices to spur demand and crimp production, sending prices back up above $80 a barrel in two years.

Earlier this week, Moody's Investors Services said it expected lower profits for oil companies would force them to cut back investment in capital spending on new production. If oil prices average $75 a barrel this year, North American exploration and production companies will likely reduce their capital spending by around 20 percent from last year; an average oil price below $60 a barrel would cut spending by 30 to 40 percent, according to Moody's. The overall decline in commodity prices is also creating winners and losers among consumers and producers.

In Asia, for example, China's energy bill has been falling along with crude prices. Other big commodity consumers like India are also seeing lower import costs for fuel and raw materials, helping to ease downward pressure on the rupee. Indonesia, one of the world's biggest oil importers, is getting a break on lower crude prices.

But as a big exporter of coal, Indonesia has also seen those revenues fall by a quarter this year. Australia, which relies heavily on coal and iron ore exports, has seen revenues fall, raising the prospect of the country's first recession in 20 years.

Read More Crude price slide hits oil exporter currencies If global growth picks up, stronger demand could help reverse the slide in commodity prices. But there are other forces at work that could continue to depress prices over the longer term.

One is the ongoing strength in the dollar, which is getting a lift from the relative strength in U.S. growth. That's attracting investment that had been moving to developing economies that have weakened, especially countries that rely heavily on commodity exports. Because commodities are priced in dollars, the strength of the U.S. currency accounts for some of the downward pressure. But shifting investment also helps explain the longer-term decline in a wide range of commodities, following a boom in commodity investment that has been unwinding since the Great Recession. Much of that investment flowed into derivatives, investments in paper backed by commodities, not the underlying goods themselves. That investment helped artificially force commodity prices higher than the underlying demand.

Read More Winners & losers: Oil's effect around the globe Now, with that speculative wave unwinding, the world may see cheaper commodities prices for some time to come, said Brian Reynolds, chief market strategist for Rosenblatt Securities. "Wall Street structured the equivalent of $22 trillion worth of commodities through OTC commodity derivatives and now they're unwinding," he said. "This is a permanent decline, for probably five to 10 years." -By CNBC's John Schoen.