Everyone now seems to agree that US house prices got out of hand and that the US health care costs are at an unsustainable level. Well, everything is relative: Between 1987 and 2009 US college tuition and fees increased by a staggering 326% (6.8% annually), while medical costs went up by “only” 186% (4.9% annually) and house prices by 135% (4.0% annually). Note that due to the housing boom, during 1987 – 2007 house prices went up by 252% (6.5% annually), almost as much as college tuition and fees in that period. These trends are illustrated in Figure 1, where all the three components are drawn so that they start at 100.

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The increase in the oil spot price seems to be mainly driven by the global demand. According to the U.S. Energy Information Administration, in 1999 the global consumption was 76 million barrels a day and today it’s about 86 million barrels. At the same time, the surplus oil capacity decreased from 5 million barrels a day to 2 million barrels a day.

There seems to be a new asset class (long-only commodity index funds and ETFs) which speculates that commodity prices rise, i.e., they are long in these markets. Here I focus on oil and I have simple points: