Oil glitters as world stampedes to ‘new gold’

A catchy nickname — “the new gold” — has been coined to put in a nutshell the glow of oil on agitated financial markets in the United States.

The price of oil long ago stopped measuring solely its value as fuel, says Cambridge Energy Research Associates. The Boston consulting firm, an internationally known industry pillar led by Pulitzer-winning industry historian Daniel Yergin, came up with the new nickname.


Much of the credit for oil’s elevated role belongs to “non-commercial investors.” The term is the U.S. Commodity Futures Trading Commission’s polite name for paper-barrel buyers such as speculative traders, hedge or index funds, and pension plans or university endowments.

What all those diverse interests have in common is that, unlike industry participants ordinarily responsible for most futures-exchange action, none is primarily a producer or user of the physical commodity.

Non-commercial investors fuelled a 350 per cent jump in activity since 2002 on the world’s main oil trading floor, the New York Mercantile Exchange, Cambridge Energy managing director James Burkhard testified recently before the U.S. Senate’s energy committee.

The new gold’s allure is still spreading. The California Public Employees Retirement System — the largest U.S. pension fund — recently amended its investment rules to let its managers trade more oil futures.

Calgary Herald