When Russia invaded Ukraine early last year, the subsequent supply-chain chaos and Western sanctions caused a spike in oil prices that consumers worldwide felt almost immediately.
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In the U.S., the rising cost of crude pushed the average price of a gallon of gasoline from $3.40 in January to a record high of just over $5 by June.
But since then—amid a weaker-than-expected post-COVID recovery in China, which has impacted crude demand—oil and gasoline prices have fallen back toward prewar prices. And with governments and businesses globally continuing to move away from their reliance on fossil fuels, there’s a new, lesser-known commodity that may be set to soar instead of black gold.
“For us here at Citi, copper is the energy transition bull trade. The world is cyclically weak right now, and that means the trade is on pause.
But copper’s eventual bull run is likely to make oil’s famous 2008 rally look like child’s play,” Max Layton, Citi’s managing director for commodities research, said in an Aug. 23 video presentation for clients.
Layton is referencing the period when oil prices spiked before the onset of the Global Financial Crisis, rising from $50 per barrel in mid-2006 to $140 per barrel by late 2007 as strong demand from emerging markets clashed with stagnant global crude production.
The veteran commodities analyst believes that copper prices could see a similar price spike over the next three years because the metal has become a favorite among commodity traders looking for exposure to the energy transition theme.
Copper’s critical role in electric vehicle batteries and other green energy technologies has led some to call it “the new oil.”
The metal is used in solar panels, wind turbines, electrical cables, and even your iPhone. In fact, copper is so widely used in construction, manufacturing, and electronics production that it’s often seen as a proxy for global economic activity and a business cycle indicator, earning it the nickname “Dr. Copper.”
Lately, with the global economy struggling to regain its stride after COVID, the doctor has been sounding the alarm (copper prices are falling), but if you ask Citi, it’s just a minor setback for the energy transition king.
