By Tom Bradley

Is it a long-term trend or an investment truth?

In my last Globe and Mail column (Much-maligned Greenback is Looking Increasingly Cheap), I held this question up to a number of economic factors - the declining supply of oil, China’s growth, Japan’s lack of it, gold’s status and the declining U.S. dollar.

I used the dollar as an example of the trend vs. truth dilemma, so naturally it produced most of the traffic on-line. But I did get a few comments about oil, questioning why it was even on the list. Michael James, one of my favourite bloggers, asked: “I was puzzled by the reference to oil. Isn't it true that we are running out of oil (but that experts disagree on how fast)?”

Of the ones on the list, oil would appear to be the closest to a truth, but even here, investors have to be careful. Perhaps we can say we’re running out of oil that can be brought to the surface for $50 a barrel. But what about at a cost of $75 or $100? As with every cycle, high prices support new innovation and lead to increased capital investment. The question is, what does the supply curve look like as prices go up? How high do prices have to go to double the world’s resource base?

It wasn’t too many years ago that the U.S. was running out of natural gas. Production was in steady decline. But low and behold, the technology to exploit shale gas came along and now they don’t know what to do with the resource they have (go figure?). And neither do we for that matter.

In any case, I’m not an expert on oil, or China or gold. The column was meant to point out that we need to be careful about what factors we declare to be facts.