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Economics

Commodity Prices: Oil likely to remain costly

GlobalPost

A picture taken on April 8, 2011 shows an employee as she examines oil on the Russian LUKOIL ice-resistant fixed platform LSP-1, built at the Astrakhansky Korabel shipyard. Some experts believe that while other commodity prices may change, oil will remain expensive.

Mikhail Mordasov

Citi has warned the commodity supercycle is ending as the Chinese driver slows.

But one commodity that could stay expensive is oil. Citi's Kingsmill Bond offers this insight in a report on oil power in Russia:

Oil is different — We see Russia as a play on oil, and oil is different to the rest of the commodity complex thanks to the power of the OPEC cartel and the political fragility of the supply side. Unlike most other commodities, oil has many drivers outside Chinese infrastructure investment; as the only major commodity to rise in price in real terms during the twentieth century, its investment and price cycle has been quite different to that of the rest.

In fact this is one area where Chinese demand can keep growing, judging by historical growth patterns:

chart

See Also: The 10 Largest Oil Deposits In The World >

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