Gold Vs Crude - Final Round

Rising gold prices are nothing but an indication of devaluation of currencies. In response to Fed's decision to keep printing more paper in order to combat western recession and a lingering uncertainty over the world economy, gold has been getting mass attention these days.

On the other hand crude oil is not so lucky. Despite an annual growth in oil demand, oil prices have swayed in a narrow band after crashing in 2008. In order to keep the global engine running and inflation under control, the oil prices are artificially suppressed at the moment. Also, the weak oil prices keep oil protected from the threat of alternate renewable energy resources.

 

However, in anycase the yawn between oil and gold is becoming too much for the jaw's comfort. This rigging will not last too long. Oil prices will soon be catching up with gold in case the gold stays on course or else, the gold must fall. But either option to ease the yawn will not help future health of economy.   

When the saints go marching in

Cairn Energy has hit oil in the Arctic region, which is being touted to be holding 20-50 billion bbls of black gold under its snow white blanket.

Other giant oil hounds, sitting at the fence, have sniffed the blood and soon they will be on it. But challenges are many in this hostile and risky zone. Transportation of oil is seen as the major hurdle in the iceberg infested waters. Besides, there is little or no room for error in this bio-sensitive area.

But such is the craving for this resource that despite all the hazard and peril, they are out to get it from anywhere, anyhow. The fact implies two things:

1. Exponential growth in demand for energy resource

2. Lack of promise shown by alternate and renewable resources at current oil prices.

Talking of renewables, China is world leader in development of renewable energy resources. China's first offshore windfarm has already started generation, while USA is still in the planning stage. China is way ahead in solar tapping with its technology and material requirement. 98% of the rare earth metals, which are important constituents in production of alternate energy resources, are exported out of china, which has abt 60% of the rare earth reserves.

Toxicity, cost, material, unreliability etc are some of the road blocks in development and usage of these energy resources, therefore leaving conventional resources indispensable. However, predicting future from here is as unimaginable and unthinkable as human civilisation's journey from stone age to space age. But one thing is sure, the society would have to go through radical changes if the soap has to go on and on. As envisaged by some sage, the correction must come from change in human reproductive, consumer and cultural behaviour, before the sun refuses to shine or the moon turns red with blood.