Letter from the Editor

Prominent investors, officials and politicians have begun to speculate that the worst of the financial market dislocation, centred on complex securitised finance, is behind us. Even if that were true - and the jury remains out - trouble is brewing in the market for the most basic of products: raw materials.

For commodities bulls, price volatility and talk of $200 crude merely confirm that the world has entered a new paradigm, born of increasing demand for energy, metals and grains in emerging markets. Clearly, accelerating consumption across the Middle East and Asia represents a step-change, and plays a large part in explaining the phenomenal performance of commodities prices this decade. The reluctance of producers, for economic or political reasons, to bring on new supply exacerbates this.

But beware focusing too much on mining strikes and delays to oil fields. Commodities prices are already testing the limits of demand destruction - let alone political tolerance - in the industrialised world. Some investors will rub their hands with glee at the thought of $200 oil. But such predictions beg the question: who can afford to pay those prices?

Liam Denning, Lex writer

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