Friday, January 11, 2008

Not Just Oil

The Economist's commodity price index hit a new all time high of 227.2, up 5.5% in the latest month and up 28.4% in the latest 12 months. Note that this index does not include oil, so anyone who tells you that the commodity price boom reflects the alleged "peak oil" doesn't know what they're talking about. Interestingly, even industrial metals have risen during the latest month. Although the big winner remain food commodities -up 6.1% in the latest month, up 15% the latest 2 months and up 49% in the latest 12 months- , just as Jim Rogers have predicted.

This continued commodity price boom both reflects the general commodity boom cycle Rogers described in his book Hot Commodities and the accelerating inflation America and many other countries suffer from.


Blogger flute said...

Now why do you say "alleged" peak oil? Aren't you convinced yet about the imminence of peak oil? I'm not saying you have to believe all the doomer stuff you can read on many peak oil sites, but I do hope you have read enough facts to understand that peak oil is here, and will most probably have profound effects on our lives, especially economically.

I would say that rising oil prices and rising prices of other commodities are parallel developments. My comments on this became so long, that I published them on my own blog instead:

12:52 AM  
Blogger stefankarlsson said...

I'm not saying peak oil isn't true. It could be true. But since I haven't seen any conclusive evidence for or against it, I am treating as possibly but not necessarily true hypothesis.

It is for example not clear to what extent unconventional sources like the Canadian tar sands can be used to increase production in the future.

1:09 PM  
Blogger flute said...

Stefan, I suppose you mean that you have not seen conclusive evidence that we have passed peak oil. I hope we agree that any finite commodity (e.g. crude oil or platinum) must have a peak production at some time (in the past, now, or in the future) and then show a production decline (which could be "bumpy" of course).

There is plenty of evidence gathering that we have recently passed peak world crude oil production. If you want to save time, I can recommend reading just one article: Matthew Simmons' latest report
Or if you're really short on time, just take a look at the charts at the end of that paper.
Matthew Simmons is one of those who have made the most thorough research in world oil production.
If you believe the Canadian tar sands will "buy us some time" before the inevitable decline, take a look at figure 9 in Simmons' paper, and you'll see that their projected output growth won't even compensate the decline in US and Mexican oil production. The same applies to other "unconventional sources" of crude oil.
There are plenty of more studies that I can point out to you, if you're interested.
I hope that understanding this will help you in your economic analyses, which I enjoy very much, and find very informative.

PS "deflationist" Mike Shedlock is obviously also convinced about peak oil, as you can gather from some of his recent blog posts.

10:22 PM  
Blogger stefankarlsson said...

Thanks. I'll look into it.

6:46 PM  

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