Growth in demand for oil has fallen markedly in the past two years — to 0.9% in 2006 from 3.9% in 2004 — despite continued global GDP growth of around 5%.

This indicates the sensitivity of demand to oil price increases in the longer run, something inves-tors and analysts tend to underestimate, says Clément Gignac, chief economist and strategist at National Bank Financial Ltd. in Montreal. He believes this will cause a gradual scaling down of the price of oil over the long term to the mid-US$40s per barrel from the current US$60.

This is just one of 13 points Gignac makes in his Jan. 11 Strategy Viewpoint. Five others also relate to commodities:

> Environmental Pressures. The oilsands region in Canada is home to two of the four biggest carbon dioxide emitters in the country and is set for “meteoric” growth, with $100 billion in projects planned for the next decade. With the environment a hot issue, higher costs for oilsands operations seem probable.

> China. The country’s efforts to slow its economy include curbing capital spending growth to limit overcapacity and to avoid a swing from boom to bust. This will probably undermine investor sentiment on commodities.

> Interest Rates. Upward pressure on global interest rates will probably detract from commodities, which don’t pay short-term cash dividends.

> Institutional Investors. There is about US$90 billion invested in various commodity funds. Those who have jumped into commodities seeking a “quick ride” rather than long-term portfolio diversification may pull money out as a result of weaker prices.

> Regulators. Concerns about the collapse of Amaranth Advisors LLC’s hedge fund in September may prompt regulators to change margin requirements — forcing a reduction in positions in various sectors, including commodities.

– CATHERINE HARRIS