Commodities Research Bureau Index Zooms to 24-Year High

The world is riding a commodities boom that is shooting prices skyward for everything from crude and copper to soybeans and coffee, and investors who got on board early are making a killing. Driving the rally are demand from China, looming shortages of key raw materials and speculation by hedge funds.

With the benchmark Commodities Research Bureau index zooming to a 24-year high, some are warning of a bubble that could soon burst. But others say the party is just getting started.

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No commodity is drawing more attention than crude, which set jaws dropping again this week as it briefly pushed through $57 a barrel. But even as oil hits new highs, investors such as Mr. Sprott are betting on where the big money will go next.While he remains a huge fan of oil, he's also gambling on coal and uranium, which have already risen sharply in price and could go higher as the world exhausts its finite supply of crude. Plenty of investors appear to share that view.

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Two words explain why: Hubbert's Peak. After watching in amazement as crude began to climb sharply several years ago, Mr. Sprott began to study the influential theories of the late Marion King Hubbert, a geophysicist whose 1956 prediction that U.S. oil production would peak and start declining around 1970 was initially dismissed by critics but later proved to be remarkably accurate.

Particularly influential on Mr. Sprott was the book Hubbert's Peak: The Impending World Oil Shortage, by Kenneth Deffeyes, a Princeton University professor and former colleague of Mr. Hubbert's. Taking the theory a step further, the book predicts world oil production will top out this decade, plunging economies into recession as supplies fall and oil prices soar.

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