The University of Texas at Austin
  • Economist discusses oil and corn prices

    By Tara Chandler
    Published: May 15, 2008
    Economist

    Both oil and corn, two key global commodities, continued their relentless climbs through record territories Friday, attracting investment dollars even as prices have risen so dramatically that some question how investors can justify the prices. Oil closed Friday at a record $125.96 a barrel, up more than 8 percent this week. Meanwhile, corn touched a record $6.39 a bushel, before falling back to close at $6.29. While the emergence of corn-based ethanol as a gasoline substitute has linked the two commodities, there are several other common factors behind the increased prices, including a weak dollar and the flow of capital away from the stock market in the midst of a financial crisis on Wall Street. With both of these energy sources, analysts are pondering the extent to which the world has entered a new era of supply and demand, or whether investor uncertainty, geopolitical instability and foreign government policies insulating much of their population from the prices have helped brew a commodity bubble. “We’ve got a distorted set of signals from oil fundamentals that are driving investment speculation,” said Michelle Foss, an energy economist at the University of Texas-Austin. “It amounts to a bubble.”

    Chicago Tribune
    Oil, Corn Prices Still Popping
    (May 10)

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