Lest anyone think soaring commodities were last year’s story, today’s screaming headlines have a very familiar ring. Whereas metals made most of the news in the last two years, now surging oil and food prices are kicking off the year.
Global growth prospects are fueling the move toward $100-a-barrel oil. Growing affluence in developing countries is increasing demand for agricultural products. Economic growth in Asia — most particularly in China — have fed the enormous run up in industrial metals, while doubts about the West’s economic standing continues to support gold’s high valuation.
Of course, discussions of demand would be incomplete without some thought given to matters of supply. And here too, the recent news has added to the wealth of commodity investors.
A leak discovered in the Trans Alaska Pipeline at first shut down the 800-mile conduit and will constrain supplies for some time longer. Even stocks of the pipeline’s owners, BP (BP), ConocoPhillips (COP) and ExxonMobil (XOM) seem to be benefiting from the broader oil market’s rise; the added supply squeeze further boosts oil companies’ profits. Count OPEC as in the happy camp.
While energy prices are going up, water appears to only move down, downhill, that is — which is adding to the human misery experienced by Australians suffering through the epic flood in Queensland, its vast northeastern state.
That water has filled the region’s coal mines and rail tracks that bring the coking coal used to make steel. Australia supplies two-thirds of this vital commodity, whose price is heading straight up — another blow to the world’s already pinched steel makers but good news for commodity investors.