BAKU, Azerbaijan, Oct.13
By Leman Zeynalova – Trend:
The International Energy Agency (IEA) excludes an extended pan-commodity period of high prices, Trend reports.
“The economic recovery in 2021 has tightened commodity markets and put sharp upward pressure on prices. Looking beyond the immediate factors that have contributed to market tightness, some analysts have posited that the world may be entering a new super cycle, i.e. a prolonged period during which strong demand and some constraints on supply lead to high prices for energy and other commodities. The readiness of governments to spend on new infrastructure, a pickup in broader business investment and the increased mineral intensity of clean energy transitions could all support such a thesis. Indeed, the IEA has highlighted the importance of copper, lithium, nickel, cobalt and rare earth elements to a secure and rapid transformation of the global energy sector, and pointed to a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions,” reads the IEA report.
The scope for a broad-based super cycle that encompasses energy markets as well as other commodities can be overstated, according to the report.
“There is no visible equivalent today to the role in the previous upswing played by China, whose breakneck urbanisation and industrialisation drove markets in the early part of the 2000s. There are also trade-offs between different commodity types: to the extent that there is a surge in demand for minerals and metals for solar arrays, wind turbines, power lines and electric motors, this should ultimately ease pressure on traditional fuel markets. In addition, as noted, there are clouds on the economic horizon that could hold back the speed of recovery, especially in emerging market and developing economies.
For these reasons, we do not anticipate an extended pan-commodity period of high prices, but there is still ample scope for price volatility and price spikes, given the multiple mismatches between current investment trends and possible patterns of demand. The impact of changes in the energy sector on consumers is naturally a matter of political concern, especially when it comes to lower income households and certain energy-intensive industries. The scope and level of carbon pricing is one aspect of this, but there are also regulatory interventions that push in the other direction by holding the price paid for certain fossil fuels below their market value. After a sharp fall in 2020, the estimated value of these fossil fuel consumption subsidies is set to rise again in 2021,” says IEA.
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