Even in slowdown green energy could be a boon for copper, whereas it may be too late to join oil rally
A quick note on commodities: a topic we will regularly get back to due to its recent markets volatility and impact on Earth/Environment (+ 'loops effect' of changing attitudes to it in open societies)
2020 was an excellent opportunity in commodities, after double dip in oil: first OPEC had a disagreement, then short term futures went negative in U.S. Indeed, as Buffett and Munger said before, 80% of world energy demand is still from fossils. Still, money could have been lost in e.g. fracking, so as always caution and selection is needed.
Nowadays, given already high prices, worried about climate change, one cannot be so sure. As global economy has never really recovered to the pre-2008 levels (not returning to former growth dynamic/trends), possibly even to pre-pandemic times. Public has shown there is room to improve efficiencies, and this could be focus during recessionary years to come. Governments also had demonstrated how they can push us towards more sustainable consumption, daily commute is not massively coming back for sure, and more environmentally-minded habits, incentives are entrenching.
Emerging markets as predicted had abysmal comeback, U.S. dollar is too strong after 2020-2021, which indicates worries about the global economy, unsurprising given China's 'slowdown and lockdowns' plus potential EM credit crunches (due to among other money/USD shortage).
A central bank such as Fed always looks through a back-mirror, instead of using big data analytics (available to tech giants like Google), it relies on measures, for which methodology is from the 70s, CPI is extremely backward-looking, there is always a possibility to overreact relying on point estimate. Even if this goes without serious repercussions for developed countries ('ring-fenced' economies), it may certainly hit already fragile EM, and “import recession” from there (see Asian financial crisis of 1997, well discussed by Russell Napier in his book).
There is still an individual fuel demand, e.g. from rising car ownership in large developing countries like India. But hard to be bullish on this over long term, as autos are one of the main early (pre-mature) death reasons among the young. Soon we may be talking about it like tobacco and alcohol, so it may either become less attractive, or get replaced by 'smarter' electric vehicles and growth of public transportation.
Short-term geopolitics could be favorable to fossil fuels, but metals like copper seem to benefit in any geopolitical scenario or whether we as citizens focus on growth or sustainability. The instability, which overpriced oil and gas bring, is pushing many pain points in places like Europe. Unsure that, even now in more consolidated industry (following many wells closures in the U.S. in 2020), the cartels are capable of controlling market over longer term. Easy credit or subsidies can always push shale/fracking to reopen, green energy is even more likely to boom. There can also be more renewed interest in antitrust regulation, as parties already frown upon Big Oil companies record profits.
This is a good example of what George Soros referred to as reflexivity: higher-order feedback loops. Similar to above, as society transitions to new forms of energy, this affects among other commodity prices, profits and taxes, possibly pushing various governments to more of different policy actions, in turn further affecting markets’ supply and demand, changing prices, and generating new attitudes among the public, etc.