Speculators Hiked Commodities? Think Again

While it's in vogue to blame soaring commodity prices on speculators, the credit crisis may be far more at fault -- in a way that's likely to keep prices high for years to come.

The only real way to get down prices of materials from everything from oil to molybdenum to copper to gold is to increase supply of those commodities relative to demand.

Unfortunately for anyone wanting to buy those materials from companies such as Exxon Mobil(XOM), Rio Tinto(RTP) and BHP(BHP), that supply response has been stymied. It could extend the period of sky-high commodity prices for many years.

While there are many candidates to take the blame, the lack of funding caused by conservative lending standards -- and the ongoing fallout from the credit crisis -- must rank near the top of the list of culprits.

The hitch has been especially acute in the mining industry, where lack of credit has been hampering the development of new operations.

"It's been bad for major producers and devastating for small producers," says Jeff Christian, managing director at New York-based specialty commodities advisory firm.

CPM advises mining firms how to obtain financing for mine development. Christian says the period of extra-high metals prices could be extended by as much as half a decade.

"The financing on those mining projects has slowed to a trickle," he says, although he adds it may be starting to thaw. Either way, he thinks at least two years of development work will have been lost before it's all over, maybe five.