Peak Copper: A Preview Of Peak Oil

In my line of work, I have to watch the price of metals very closely. This year has been very interesting, indeed, for this year has brought us Peak Copper. This is a preview of what will happen with oil by the end of the decade.

Copper closed yesterday at $3.784 per pound. Thanks to overnight trading abroad, it opened this morning at $3.885 per pound and is currently trading at $4.035 although it went as high as $4.16. That's a quarter in one day in a metal that usually moves less than a penny a day. This is due to the fact that demand is outpacing supply and global inventories are down to a three day supply. Traditional inventories have run approximately seventy-one days supply.

According to Citigroup, demand for copper will climb 5.7% this year and production will decrease by 155,000 metric tons. Of course, that forecast for demand assumes that enough copper will be available to meet it. That's a bad assumption, there won't be. By the middle of June, we will encounter supply disruptions in finished copper products due to shortages. The question won't be, "What do I pay for it?" It will be, "Can you get it?"

This will cause construction globally to stall. It's the only way to correct the problem. Hold on to that existing house you're thinking about selling, in a few months it will seriously be a seller's market.

Now, think about this problem in terms of oil. Why aren't the oil companies building new refineries? Because they will set empty when peak oil hits. A refinery with nothing to refine is also known as a warehouse. We're talking about good ole fashion 70's style gas rationing, forever. Think $3.00 a gallon is bad, try imagining five, six or even seven dollars a gallon, hitting you virtually overnight.

The difference between oil and copper is that a pause can be taken in construction for global inventories to recover, that's not possible currently with oil. A multi-faceted approach to the coming Peak Oil must be started immediately. E85 alone is not the answer, although every car produced in the US starting with next year's models should be flex fuel vehicles, and a massive E85 movement needs to follow.

Like I said though, other forms of transportation need to be developed, and that development needs to happen today, not tomorrow.