What is Commodity Context?
We live material-intensive lives. Day in and day out, our personal grind requires the extraction of literal mountains of stuff—oil, gas, lumber, stone, ores for metal, etc.—from the Earth. The process of recovering, transporting, and transforming this stuff into the things we use every day is largely alien to most of us: dirty, complex, and almost always far from mind. Even more abstract are the markets in which these commodities trade and are priced daily, filled with talk of spreads, benchmarks, derivatives, and forward curves.
The goal of this newsletter is to demystify the commodity industry. On the supply side, this will include looking at the internal workings of commodity production systems like mines, oil sands facilities, gas wells, pipelines, and sawmills. We’ll also look at major drivers of end-use demand for these commodities including the accelerating energy transition, post-COVID air travel recovery, the housing market, as well as broader macroeconomic forces. Finally, I plan to cover tangential but no-less-important topics surrounding extractive industries like emissions, the economic opportunity cost of pipeline bottlenecks, and the ever-evolving world of ESG data and investment flows.
In terms of style my hope is to keep these newsletters chart-forward and relatively low on the word count. Wherever possible I will be using freely available data—either government-supplied or readily-observable online—so that readers can follow along and hopefully reproduce my results.