Guru watch

“All key commodities required by the modern economy are finite in supply, and the cheapest and best have gone first,”, says Jeremy Grantham in his latest piece for GMO, the US asset manager he co-founded. Yet this simple fact is only now becoming plain as “we are approaching our limits to physical growth”.

Grantham, who is devoting the vast majority of his wealth to fighting climate change, says that oil is the best illustration. “Simple gushers were once common.” But now we need to drill deep offshore or rely on shale to find new sources. “As a result, the real price trend of oil has reached three or four times its 1965 level in spite of incredible innovation by the energy industry.”

The oil price first broke its “long flat trend” in the early 1970s. Other commodities followed about 30 years later as China joined the global economy and its share of global commodity demand exploded higher. For example, the best copper deposits have already been consumed – “the average ore grade of active copper mines... is estimated to have fallen from about 2.5% 100 years ago to about 0.5%”.

That’s bad news because the green energy transition “will be spectacularly resource intensive” and require “precisely those metals which are most constrained”, including copper and lithium. Russia’s invasion of Ukraine will only increase pressure on raw materials, including food and fertiliser. The best hope is that persistent innovation and investment in venture capital and research can lead to breakthroughs in energy production or storage.