A Future that's Tense

By: Sunil Sanghvi ET AL

Trends in resource prices have changed abruptly and decisively since the turn of the century...Over the past 13 years, the average annual volatility of resource prices has been almost three times what it was in the 1990s.

This new era of high, rising, and volatile resource prices has been characterised by many observers as a resource price “super-cycle.”

Since 2011, commodity prices have eased back a little from their peaks, prompting some to question whether the super-cycle has finally come to an end. But the fact is that, despite recent declines, on average commodity prices are still almost at their levels in 2008 when the global financial crisis began. Talk about the death of the super-cycle appears premature.

Despite intense current focus on shale gas and its impact on reducing natural gas prices in the US, most, if not all, resource prices remain high by historical standards --even at a time when the world economy has not fully emerged from its post-recession period of slow growth....

There also seems to be increasing evidence of a more structural supply issue that is driving longer-term volatility. Supply appears to be progressively less able to adjust rapidly to changes in demand because new reserves are more challenging and expensive to access. For example, offshore oil requires more sophisticated production techniques.

From “Resource Revolution: Tracking global commodity markets”