The Oil Drum

"We live in crazy days," said Juan Eduardo Herrera, vice-president of strategy at Codelco, the world's biggest copper producer. "These prices are not here to stay and nowadays they are causing more harm than good to everybody."

When the major real market (i.e. the physical metal) people say things like that it behooves everyone to pay attention.

The bull market in commodities...is beginning to challenge the laws of physics.

and thanks to this apparent "bubble" in commodity prices, the recent pull-back in crude prices found an intraday floor of $68.51 before moving back above $70 again.

Man Group's executive president and head of global metals, Fred Demler, believes a stronger US dollar will cause prices for most commodities to decline. "And when prices do fall, it will be the correction of all corrections."

>O.K., let's try real hard to find the cause of this commodities boom, could it be, oh let's see....trying to bring almost two billion people from an animal/people powered society into the modern era in a decade time span? (China/India)....could it be that we came off a commodities collapse in the 1980's early 1990's, so that gold is still cheaper in adjusted inflation terms than it was in the 1970's?  Could it be that investors who have gotten their clock cleaned on successive bubbles from the S&L crash (housing collapse?  I remember the 1980's....I laugh at housing collapses....HA, HA, HA,:-O), to the internet "tech bubble" crash, to the Euro bubble, to....yep, you got it...someone told them to go "with the hard assets, the metals, the oils, we will always need those (true enough, but when the value of money exchanged on these items begins to wildly exceed the world value of these items, something is getting ready to happen....but, money has to go somewhere, and where to put it?  You try to choose, and remember, historically it's not been such a great idea to buy items at historic highs  (oil, gas, commodities are getting closer to the all time top)

Let's admit it, the commodities bubble is just that, a bubble, and it shows signs of collapsing even bigger and sooner than the housing bubble...only two wild card holds them this high and that is China/India.  Most stats show that if you take these two out, the efficiency of production/use/recycling of commodities has improved in the developed world, and demand has not really risen appreciably.  Energy consumption in the U.S. for example has went down, not up, as a percent of GDP...

Which brings us to this dollar thing....I am going to go out on a limb here and say the dollar is not that bad of a bet.

I know, I know, all bets are that a MASSIVE currency collapse is coming, that we will have panic in the street as even hookers and Starbucks will turn down dollars  (my creditors are still accepting them, however), and the dollar will fall to nothing compared to.....(???), and there's the rub....compared to what?

Ohhh, that's right, the mighty Euro, the currency of a..."group" (??) of nations several of whom have recently renounced it's own charter....founded by a nation whom, along with it's biggest most powerful neighbor and fellow member run constantly out of complience with all the groups own memoranda of understanding on budget deficits, currency valuation, work rules and interest rates...a group with an aging demographic that is sure to be a greater burden on it's social system than even the U.S. Social Security system faces...and that is, as a percentage of GNP, a bigger importer of oil and gas than the U.S., and with it's only "internal" oil and gas supply dropping like a stone, and with a Muslim minority far greater than that of the U.S., and far more militant and directly connected to the "struggles" for Islamic and Arabic "liberation" than that in the United States.....THE EURO???? !!!!!!

BUT THE CHINESE!!  They are coming after us, don't ya' know....of course, they have their own energy woes, and not only that, are driven by exports to....well, mostly us, despite attempts to diversify, because the EU does not fancy being buried in cheap Chinese plastic items after all....and the above mentioned rise in commodity prices mean those cheap plastic items are not so cheap after all....

As I sit typing this, I have the local news on TV, here in central Kentucky....where Toyota is announcing expansion of it's large modern plant in Georgetown KY to build the Camry Hybrid, where Honda is looking at Southern Indiana or Ohio to expand Civic production, and where UPS is expanding before even it's last expansion is finished to cope with increasing air freight to and from the aforementioned China.  Now one assumes that Honda and Toyota, selling cars in the U.S., and China, selling everything from Christmas cards to auto and truck brakes in the U.S., fully intend to take payment in....dollars, maybe?

I look at the stock charts....I should have bought oil and gas stocks, right?
Well, only if I ignore Cummins Engine, Caterpiller, and Deere&Co, who have went anywhere from double to triple in the last 3 to 5 years, BEFORE you count dividend reinvestment....who'd a thunk it?

One more thing....try to avoid the phrase "peak everything".  It is a clear violation of the terms of true "Peak" and simply makes no sense  (peak aluminum?  It's recycleable material, and is still cheap enough that you don't even see the homeless and poor out walking the highway to pick up cans...peak iron or steel?  Demand is high yes, but Australia alone has enough to provide for a century, they just don't have enough manpower to get it out fast enough...."peak everything" makes those concerned about the real issue of peak oil or "oil and gas depletion" sound silly by association, and borders on "Chicken Little syndrome".

Folks, the depletion of oil and gas are real issues, and deserving of hard, HARD work on replanning our energy system, conservation, and applied engineering.  We may need to work on getting a grip here and trying to stay a bit more on topic.

Roger Conner  known to you as ThatsItImout