Tar sands are profitable with oil at $65/barrel. The mere threat of opening up new exploration whether on the shelf or in ANWR has an immediate impact on prices (as long as the threat is credible).
The dollar is not nearly as overvalued as some would like you to believe. The EURO is most the overvalued currency on the planet. Trichet's blind devotion to inflation targeting is leading the Continent down the path to a nasty recession. Spain is done for the next decade, and Italy isn't far behind. German real wages have been dropping since the turn of the century, Hungary is overextended, and France is still wrestling with the concept of the working week. The value of the Dollar against the Euro has been a driving story in the commodities markets. As the Euro/Eurozone continues it slide, I full expect commodities markets to reflect the "stronger" dollar.
The 20-year commodities supercycle argument (from Goldman most notably), is predicated on inbalances in supply and demand over the long-term. Wheat, Corn, and Soybeans production can all be changed within short-term horizon. Supply arguments are far more relevant in infrastructure intensive commodities (energy, mining) than the softs and the tropicals. However, the demand side of the equation can also be altered in the short term, and it is.
Oil consumption in the US is down down for the first time in 27 years. With both the U.S. and the Eurozone headed for recession, demand should continue to slacken.
The best cure for high commodities price is high commodities prices. And they were pretty damn high.
