What a great way to start 2008!

Oil hits $100 US, gold also hits record
Last Updated: Wednesday, January 2, 2008 | 1:25 PM ET
CBC News

Oil hit $100 US a barrel for the first time and gold prices broke a 28-year-old record on Wednesday as the bull run in commodities got new wind.

Data from the New York Mercantile Exchange indicated the price of the February contract for light, sweet crude oil hit $100 US shortly after noon ET. The price slipped to $99.32 US by 12:18 p.m. ET, up $3.35 US.

That broke the record of $99.29 US a barrel that was set last November.

Oil prices jumped after OPEC warned it might not be able to meet its share of global oil demand as early as 2024.

Fresh violence in Nigeria — a major global oil producer — was also seen as a factor in driving up prices.

On Tuesday, armed militants attacked two police stations and a hotel in the main oil industry centre of Port Harcourt. Thirteen people, including four police officers and six attackers, were reported killed in the raids.

Attacks by the militants have reduced Nigeria's oil exports by about 20 per cent over the past two years, putting upward pressure on global prices.

On Thursday, the U.S. government releases its weekly report on oil supply data. Analysts are looking for supplies to show a seventh consecutive weekly decline.

Oil prices rose almost 60 per cent in 2007 as inventories shrank amid continuing strong demand. The big rise in oil is often cited as one of the main reasons for the rise in the Canadian dollar. The loonie — which gained almost 20 per cent against the U.S. dollar last year — was up .12 cents at $1.01 US in early afternoon trading.

Gold breaks 28-year-old record
The futures contract price for gold for February delivery hit $861.60 US per ounce in morning trading on the New York Mercantile Exchange, up $23.60 US from the previous close.

The spot gold price hit $858 US an ounce in morning trading. That tops the previous intraday record high of $850 US an ounce set on Jan. 21, 1980.

Once inflation is taken into account, of course, gold is nowhere near record levels. For gold prices to hit an inflation-adjusted record high, bullion would need to be worth about $2,200 US an ounce today, depending on which inflation measure is used.

Stronger oil prices, a weak U.S. dollar and global political tensions were all cited by analysts as reasons behind gold's latest rise.

Gold prices rose 30 per cent in 2007 and are up more than 50 per cent in the last two years.

Platinum also hit an all-time high.

Yeesh. Things are already looking dire. OPEC is already scaling back their reserve estimates by another decade. Last year they were all, "we'll be able to provide swing production for decades", along with the IEA/CERA estimates that Peak Oil was 30 or 40 years away. Does it not seem strange that speculation and political issues are causing swings in futures pricing of 5% on a regular basis if there's continually increasing supplies in the pipe? Still, no one seems to want to go any deeper into the assertions that production is flat, while demand continues to increase, particularly in those nations that used to be dependable exporters (eg. Saudi Arabia, Norway, Russia) but now feel the need to hold onto more and more of their production for insatiable domestic consumption (hey, the Russians are buying cars now at record numbers too).

This will affect the U.S. most of all. With the subprime mortgage fiasco only to get worse this year, potential chocks in the importing chain will raise the cost of energy and the inflation even more. It all could not have some at a worse time. The U.S. imports upwards of 70% of its oil and gas, and 70% of its economy depends on consumer spending. How scary a tenuous situation is that?

It seems everyone understands that we may have to very soon start living with less or spending a lot more for the same things. I think 2008 is going to be the year of a start to global economic hurt, the year when everything becomes obvious to the most ignorant, when the politicians, economists and bankers will no longer be able to say, "everything's good - don't worry, be happy and spend, spend, SPEND!

All they were interested in is trying to keep the sinking ship afloat until bonus time at Christmas so all the powerful shills make their big money. Certain governments will try to navigate the system through all of this year's shit by throwing liquidity at the banks, etc. until the mortgage and credit crises work through the system, but I'm sure they're crapping bricks too. They can't be too confident that they're going to be able to drive through the oncoming storm either. Batten the hatches! It's gonna be a wild ride!