Given the world is only firing on one hemisphere right now the strength of commodity markets is staggering and just a bit terrifying.

Dairy prices were up again this week, which is good news for the local economy. That's a commodity that tends to get well reported in this country for obvious reasons.

But once you've fought you're way through all the headlines about the European meltdown and stop-start recovery in the US you find Bloomberg's news wire laden with stories about spiking prices in any commodity you care to name.

Take rubber, which can seem pretty obscure to us - as a tradeable commodity at least.

India - the fourth biggest producer - looks set to drop the import tariffs on rubber imports next year because it can't met domestic demand for car tyres.

Prices for raw rubber are at record highs after rain interrupted the season for collecting the stuff (from trees). Analysts are also blaming demand for cars among India's rapidly expanding middle classes - sales in October up 38 per cent on last year.

India's Society of Automobile Manufacturers reckons it will double sales by 2015 to about 3 million units.

So there we go - no prizes for guessing which way the price of a new set of treads is going in the next few years.

There are also fresh stats about gold out of China this week. It is no secret that it is a hot commodity at US$1390 per ounce, up 27 per cent in the past year.

The latest stats show China imported five times as much gold in the first 10 months of 2010 as it did in all of 2009. That's about 209 tonnes, which is a lot when you consider that domestically China is the world's largest producer of gold.

Analysts were surprised by the size of the leap and pinned it on high inflation prompting investors to hold. Cotton was probably considered a sunset industry in the 1970s when polyester suits were all the rage. But it is another old-world product making a big comeback. Prices have surged 67 per cent in 2010.

US exporters say they can't get it out of the country fast enough and of course the demand is all out of China where textile factories are still expanding.

One of the scariest commodity stories this week was, somewhat predictably, about oil.

As pump prices in New Zealand creep back towards $2 a litre a report from independent oil economist Mamdouh G. Salameh this week predicted that this year's projected supply shortfall of almost 5 million barrels is likely to widen to 9.2 million by 2015.

That'll mean new record highs - topping the last peak in July 2008. But, Salameh says, the gap between supply and demand is likely to be too big to reconcile with even higher prices.

His best-case scenario is shortages curtailing economic growth. His worst-case scenario is conflict and potentially war.

It doesn't get any better when you look at food commodities. Rice, which Bloomberg casually describes as "the staple food of more than three billion people", is tipped to triple in price over the next 18 months after flooding in key production regions like Thailand restricted supply.

That would take it back above levels last seen during the 2008 spike in food prices.

In 2008 food commodities prices blew out to scary levels because Eastern and Western economies were growing at unprecedented rates.

That crisis, which had people protesting in the streets of Europe and Asia, is easily forgotten. It was overshadowed and resolved - in the short term at least - by collapse in demand in the West after the financial meltdown.

But the underlying problems were never resolved. What will happen to prices if and when US and European economies return to the kind of economic growth their populations have come to expect?

The upside for New Zealand is that our economy is led more by the export of commodities.

When they are on the up so too is our dollar and that provides a natural hedge against the rising costs of imports.

But what we see bubbling just below the surface of all the news about sovereign debt are even more serious and structural problems in the global economy.

twitter.com/liam dann