An unprecedented wave of disruptions is facing energy and mining commodity markets. We have already seen environmental policy, socioeconomic changes and technological innovation kick off a major transition to low- or zero-carbon technologies.
With the Paris Agreement targets set, governments are reinforcing their focus on meeting their greenhouse gas (GHG) reduction goals. This comes at a time when structural changes have lead to slower demand growth for hydrocarbons and several base metals compared with recent growth in supply. Many questions surround expectations for recovery from the resultant supply glut.
Renewable technology costs are falling, and as battery storage capabilities and economics improve, renewable energy will become more reliable and competitive — potentially further displacing demand for oil, coal and natural gas in the power sector. This raises major questions about the imminence of peak oil demand, the role of gas as a bridging fuel, and prospects for coal demand growth beyond the 2013 peak. But the pace, nature and implications of the transition are not easy to predict.
We have identified four major themes to consider as we look at commodity markets that are experiencing major transformations:
- The strong growth in hydrocarbon and base metal supply is not being matched on the demand side due to major transitions and structural changes
- As major commodity producers and consumers navigate the resultant supply glut, their strategic considerations will have wider implications on industry players
- Transitions to alternative technology in power and transport raise questions about the imminence of peak oil demand as well as demand growth for other fossil fuels
- Adapting to transitions in energy, the investment landscape presents new challenges and opportunities, requiring innovative strategies to access new markets or strengthen positions in traditional markets.
In our latest report, we discuss the key questions shaping commodity markets, to be addressed through our research over the remainder of 2017 and into 2018, and explore these four themes in greater depth.