Metals are proving fossil fuels are not indispensable
David Fickling And Ruth Pollard
Last year began with a promise from President Donald Trump to make a commitment. The future of “peace through strength” By freeing up America’s fossil fuel resources.
Judging by the direction of commodity prices, the opposite situation is happening. That’s because the hottest metals at the end of the year are those most indelibly associated with the mass electrification that is making coal, oil and natural gas increasingly redundant around the world.
Silver rose above $80 per ounce for the first time in its history this week, capping the 18 percent rise last week. Copper also broke a record, rising by 6.3 percent to $5.92 per pound.
These two metals are indispensable for electrical systems. Every wire, cable, motor, and motherboard in your home contains copper, the best reasonably priced conductor of electricity. Many also carry smaller amounts of silver; this silver is the most effective conductor except one, whose high prices are generally limited to thin films printed on key contact points.
The solar industry in particular has become a major consumer of silver, using approximately one-fifth of the world’s supply. Electric vehicles account for a small but rapidly growing share of the total: Each uses about 70 percent more silver and three times more copper than a conventional internal combustion engine car. When you add in demand from AI chips and, in many cases, stagnant supply from mines that have been mined for centuries, it’s little surprise that prices for electrical metals are soaring.
It is definitely possible to steer this electric revolution in favor of fossil fuels. Although electricity generation from coal is largely in decline, it still produces nearly as much electricity as renewable energy sources. Gas-fired electricity is only really on the rise in the USSaudi Arabia and Iran, but growth there has been significant and may continue thanks to the rollout of data centers and air conditioning and the closure of oil-fired power plants. Even oil could benefit if all that extra copper and silver was funneled into hybrid vehicles rather than just battery-powered cars.
But that’s not what commodity markets suggest. U.S. crude oil futures fell below $55 a barrel on Dec. 16, near their lowest level since the first Trump administration. Imported LNG prices from Asia, Dutch gas and Australian export coal all are currently flirting with five-year lows.
Fossil fuel producers made a bet with the world in 2025: Given adequate supply and favorable political winds, they could boost demand even in the face of cheaper, cleaner renewables and electrification.
The Organization of Petroleum Exporting Countries opened the tap and increased the cartel’s production to its highest level since the beginning of 2023. LNG producers in the United States have signed up to a record number of new export projects, betting that foreign buyers will clear the domestic gas surplus. China’s coal production broke a new record with an increase of 1.4 percent compared to the previous year.
It doesn’t work. This year’s boom in fossil fuel production is now piling up in inventories and causing prices to plummet. Oil on water (the amount of crude oil sitting on tankers because it is in transfer or waiting to find a buyer onshore) has reached the highest level since April 2020, when prices turned negative as the COVID-19 pandemic devastated demand.
Egypt, India and Pakistan are delaying or canceling LNG cargoes, and Japan’s Jera Co., long the biggest buyer of LNG, is turning to sellers to get rid of their excess. About 90 percent of the modest increase in China’s coal production this year came from inventories rather than furnaces.
Fossil fuel producers have enormous power to set the terms of the energy debate. In the Middle East, their interests and the interests of the state are so intertwined that they are essentially indistinguishable from each other. Oil producers in Russia, the United States, and elsewhere have managed to take over the government even though they are much less important to the domestic economy. Likewise, coal production in India, China and Indonesia has political importance far beyond its value in energy and industry.
However, it is the consumers who will have the final say. Rising prices of copper and silver, as well as other clean energy mainstays such as lithium carbonate and solar-grade polysilicon, currently at nearly 18-month highs, suggest stronger demand for clean energy than carbon-based energy.
Like Russia’s invasion of Ukraine in 2022, the arrival of the revanchist Trump administration was seen by supporters as an opportunity to show the world the indispensability of fossil fuels.
As with the previous geopolitical shock, these promises collapse in less than a year. The petro-states that dominated the 20th century have had their day. The future is in electricity.
David Fickling is a Bloomberg columnist covering climate change and energy. He previously worked for: Wall StreetJournal And Financial Times.
Ruth Pollard is Bloomberg’s chief opinion editor. He previously served as a Middle East correspondent. Sydney Morning Herald.
