Last year an important milestone was reached in the history of the world's economic development: China overtook the United States as the world's largest energy consumer. Since oil was discovered in 1859 in the countryside of Pennsylvania as an abundant and convenient source of energy, the world's economic development experienced an advance unparalleled in history. The importance of energy to a modern way of life cannot be overstated; without cheap and abundant energy life is brutish and short. For those who believe history has an arc, we are witnessing an economic bend towards the world's largest population centers in Asia. At some point China will have a larger economy than that of the United States.

The development of China has enormous implications on investment themes. One that has not been in the headlines much lately is energy. Energy demand in the world is growing because the developing countries such as China and India are consuming more than can be offset by developed countries becoming more efficient. This ever increasing demand will not stop. However, supply of oil is constrained and will likely be more so as a result of events like the BP oil spill. Economics 101 tells us that when there is constrained supply and growing demand, price goes up.

Indeed, unless a technological breakthrough supplants oil, we can expect to see demand controlled through price. The implications of rising prices are enormous. Think back to 2007 when oil was over $140 per barrel. It is not unreasonable to believe we'll see that scenario repeat itself. With commodity prices suffering this year it is a good time to ask yourselves if your portfolio is prepared for that.

Brennan R Redmond, CFA

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).