The numbers don't support
The price changes.
Average annual increase in worldwide consumption since 1980 = 1.15%
Average annual increase in worldwide consumption since 2000 = 1.61%
2007 consumption data are not available, but the largest annual changes since 1980 were 3.41% from 2003 to 2004, and -3.44% from 1980 to 1981.
Average annual increase in worldwide production since 1980 = 1.07%
Average annual increase in worldwide production since 2000 = 1.79%
So supply and demand don't change much from year to year, and they stay closely coupled.
There's nothing in the data that supports the price increases we've seen in the last year. I've seen numbers that suggest that all of the price increase since 2006 can be explained by the decline in the dollar and the increase in oil futures investment.
There's also a consensus (albeit from the same people who pooh-poohed the idea that both the internet stock and real estate bubbles existed) that what we're seeing in oil futures is the result of money bailing out of the real estate crash and landing in commodities. It makes sense, although I don't know how to verify it.
But no asset class is immune from speculative bubbles. And no investor class is either.
--Shannon
The price changes.
Average annual increase in worldwide consumption since 1980 = 1.15%
Average annual increase in worldwide consumption since 2000 = 1.61%
2007 consumption data are not available, but the largest annual changes since 1980 were 3.41% from 2003 to 2004, and -3.44% from 1980 to 1981.
Average annual increase in worldwide production since 1980 = 1.07%
Average annual increase in worldwide production since 2000 = 1.79%
So supply and demand don't change much from year to year, and they stay closely coupled.
There's nothing in the data that supports the price increases we've seen in the last year. I've seen numbers that suggest that all of the price increase since 2006 can be explained by the decline in the dollar and the increase in oil futures investment.
There's also a consensus (albeit from the same people who pooh-poohed the idea that both the internet stock and real estate bubbles existed) that what we're seeing in oil futures is the result of money bailing out of the real estate crash and landing in commodities. It makes sense, although I don't know how to verify it.
But no asset class is immune from speculative bubbles. And no investor class is either.
--Shannon