Oil Copper Spread

Prof Krugman highlights the following chart:

Copper is mainly driven by economic factors while oil both by eco and geopolitical risks and both commodities now seem to tell a different story.

Here we go again - Soaring Food Prices

Prof Krugman attributes the recent surge in food price to the declining supply following weak harvests in Russia. Global per capita grain production is down 5% in the past 2 years while demand is growing. With low demand elasticity large prices rises are necessary to curb consumption.

Crude Oil and Natural Gas

Econbrowser has the explanations and the equations.

"Let Δo_t denote the monthly percent change in in oil prices (technically, the change in the natural logarithm) and z_t the percentage gap in cost (technically, z_t = ln(o_t/6g_t)). If you use a regression to try to predict oil prices from their own lagged values and the lagged oil-gas cost gap, a positive gap such as we have at the moment does tend to tug down future oil prices slightly, though the coefficient is not statistically significant. Here are the regression coefficients, with standard errors in parentheses:

On the other hand, the cost gap does seem to help significantly to predict where natural gas prices might go. With the gap currently at z_t = 1.13, the historical regression below might lead you to expect natural gas prices to climb by 10% a month (0.103 x 1.13 = 0.116) until the gap is closed.

"

Weird Stuff Going on in Natural Gas ETF

Excellent little summary of the issues surrounding commodities etfs from FT Alphaville.

Commodities ETFs

Gold:

Silver:

GSCI:

Oil:

Natural Gas:

DJ UBS Agricultural Commodities:

DJ UBS Industrial Metals:

DJ UBS Precious Metals: