I believe the Club of Rome has a model to examine what might happen if political and economic leaders do not take note of the mathematics of economic and population growth in the context of finite resources (oil and industrial metals included). There is a clear relationship between investment and extraction/processing rates. Unfortunately, that investment funding, which itself is a finite resource, is not going sufficiently into non-renewable resources and agriculture, or renewables for that matter, so we are where we are. Re-read Limits to Growth the 30 Year Update.

Most of the gadgets that we use are made of steel. The only viable material around for the construction of structures is steel. When looking at the infrastructure of India, China and Russia, the only conclusion one makes is that these countries are going to need all steel available to upgrade their infrastructure. As long as there is demand ready to absorb the high price of steel, expect inflationary tendencies arising from the high steel prices. And ofcourse, it is going to affect us.
When the steel manufacturers will no longer be able to pass on the high prices to the buyer expect then an end to the demand driven high price of steel. Given the fact that different steels get different applictions, the one area where one could see imediate falling prices is in the car industry where the fuel crisis already has affected comsumers with the result of many would be new car owners re-evaluating investments in new cars.

Todd,
I have reconsidered my position before my interlocutors in respect to this commodities bubble since you are so positive and feverish to support that it has nothing to do with speculation manoeuvres, especially oil prices. Your arguments involving demand, of course, make sense.
So, what do you say about Roger Diwan’s opinion regarding to a possible regulation and its immediate repercussion over the oil prices?
And if you think that regulation actually does not work, what about the bad consequences? What are exactly the global and local risks surrounding this decision?

I think recently people have misunderstood the supply and demand theory and think that strong demand will always keep driving up prices. Although strong demand can drive up prices this is not always the case, and if you look at mobile telecoms you will see an excellent example where increased demand has meant new players come in and actually prices drop.

There is no shortage of iron ore, in Australia for example companies are sitting on large deposits to keep prices high but eventually other playes will come in, production capacity will incease (and it is now) and things will settle down. There are also large reserves in Africa that will be unlocked now that good returns can be made, and this will also help keep prices in check.

I think demand for commodtities will remain strong, but eventually market forces will keep a lid on things, there is no need to panic.

Greg Atkinson
http://www.shareswatch.com.au

We saw that higher oil inventories will lower the price of oil. If we keep driving less and use less gasoline and energy, we can and we will bring oil below $100. Even if OPEC and speculators want to drive up the price of oil with talk, what it boils down to is if supply keeps going up, the price will come down.

Everyone keep it up and save on gas and save the world economy.

I think the best way to understand this conlict in response to the Iraq war 2003 that happened in particular, is to watch indicators such as the economy. Since that war gas prices began to rise significantly and by no suprise the government hasn’t been able to put a hold on it. So many issues in terms of food, oil, and commodities with immediate need in our society are scarce. This next President of the United States will have to change foreign policy and reorganize a group of individuals who are willing to tirelessly push new policies that will reach in these areas of insufficiencies in our market. The Middle East and Latin America in particular, being independent markets are not going to put themselves out of business, they understand the international market and the excess of it. I believe they want to continue to do business, but fairly and not in the name of blood (conflict) unless pushed. Domination is conflicting in communication in Iraq.

The laws of supply and demand have always been with us and let us hope they shall remain. It seems to go over some peoples heads the importance of juxtaposing a price with demand; if it wasn’t then perhaps some of us would have to queue-up for everything - petrol suddenly becoming the least of our problems. Please allow me to offer a very basic example of what could happen should this self adjusting law dissapear; Let’s imagine a supermarket chain was selling an awfull lot of tomatoes, so much so, that all it’s outlets sold out everyday before closing time. It decides to call all the wholesalers in the country requesting that every tomatoe they posses will be bought by them. Now, the wholesalers can oblige at the same price or they can take advantage of this huge demand by insisting on a higher price. Our first reaction to these unscrupulous wholesalers is that they are just being greedy, and we would be correct. However, if the wholesalers didn’t ‘get greedy’ Sainsbury’s would have left the whole country (apart from it’s own customers) without tomatoes. This is where the ‘law’ comes into play - by asking a higher price, Sainsbury decide to not quite buy all their tomatoes, hence a few are left over for the rest of us. It’s probably the simplest economic strategy but with the profoundest positive outcome - the unwritten law that manifested itself to mankind almost like a gift from the gods (it could almost have been the eleventh commandment).

So, China and India’s insatiable appetite could be a tad more ferocious were it not for these price increases - and where would that leave the rest of us? Without a pot to pee in, no doubt. And besides, now that these two ecconomies, as do a few others, find themselves in a long overdue position to improve their infrastructures we cannot begrugde them it - most in the west have had their turn, now it’s theirs. We should really look at the positve side; by them getting richer and investing in their own countries infrastruture, are they not in turn creating a wealthier population? Does this not in turn open new markets for the western conglomerates? Have any of you seen how some of the chinese population now spend their free time? Yes, walking along splendid shopping malls,spending, and yes, they drove to the mall in their imported BMW.

Let’s look at the positive side then - the higher prices we currently pay for an assortment of commodities can almost, if not definately, be viewed as an investment by the west into a strong future market with a healthy and modern infrastructure. Our own saturated markets will sigh a breath of relief when this’investment’ starts to pay dividends.

Incidently, all you share holders out there - what do you think makes the stocks you hold rise in price (when they do) ? Yes, you guessed it, that good ol’ law, SUPPLY AND DEMAND.