Kate Mackenzie What Monty Python can tell us about commodities

For those who missed it on Saturday, John Authers combined the two topics. The commodities surge of recent weeks, he writes, could reflect a scenario similar to the cheese shop sketch; or it could reflect the dead parrot sketch.  Which one depends whether the tentative signs of demand picking up reflect genuine green shoots, or simply the effect of re-stocking.

One explanation is the cheese shop scenario; that demand is drastically outstripping supply. Manufacturers across the world leapt to close off production last year, either because they expected lower demand or because the credit crunch meant that they could no longer get financing.

That would support the ‘super cycle’ theory of commodities markets, and the peak oil thesis.


More negatively, there is the dead parrot scenario. This holds that, to paraphrase Cleese, this economy wouldn’t “voom” if you put 10,000 volts through it. It is dead.

On this analysis, the huge bounce in oil prices is, instead, a condition brought on by speculative excess. The oil price is instead being driven by investors piling into oil futures, making a bet that loose monetary policy will create inflation.

It’s a sombre thought, and commodities bulls are already being knocked somewhat today by comments from the Chinese premier Wen Jiabao suggesting demand growth is not so promising.

For those who want reminding, here is the celebrated parrot sketch:

Related links:

Surreal goings-on in the commodities show (FT, 13/06/09)