Why the prices of both oil and the metals that seek to replace it are rising

OIL IS MAKING a comeback, at least on the face of it. On February 8th the price of Brent crude rose above $60 a barrel for the first time in more than a year. Battery metals, too, are enjoying a run-up. The prices of cobalt, lithium and some rare-earth metals have soared since late 2020, with copper and nickel enjoying a longer climb. It is tempting to see the surge as evidence of competing bets about the fuels of the future. For both oil and battery metals, the reality is more complex. Some of the rise in oil prices is, of course, linked to expectations about demand. Oil investors have taken hope that rising Chinese demand might be matched elsewhere. In India, consumption of liquefied petroleum gas, widely used as a cooking fuel, is up. In America, President Joe Biden’s proposed stimulus of $1.9trn may bring a jump in economic activity and therefore oil demand. However, the pace of economic recovery is not assured. The faltering roll-out of vaccines and the emergence of new, more contagious strains of covid-19 continue to weigh on oil markets. Indeed climbing oil prices have much more to do with constraints in supply than with confidence in demand.