How technology is reshaping supply and demand for natural resources
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The ways we consume
energy and produce commodities are changing. This transformation could benefit
the global economy, but resource producers will have to adapt to stay
competitive.
The world of
commodities over the past 15
years has been roiled by a “supercycle” that first sent prices for oil, gas,
and metals soaring, only for them to come crashing back down. Now, as resource
companies and exporting countries pick up the pieces, they face a new
disruptive era. Technological innovation—including the adoption of robotics, artificial
intelligence, Internet of Things technology, and data analytics—along with
macroeconomic trends and changing consumer behavior are transforming the way
resources are consumed and produced.
On the demand side,
consumption of energy is becoming less intense and more efficient as people use
less energy to live their lives and as energy-efficient technologies become more integrated in homes,
businesses, and transportation. In addition, technological advances are helping to
bring down the cost of renewable energies, such as solar and wind energy,
handing them a greater role in the global economy’s energy mix, with
significant effects for both producers and consumers of fossil fuels. On the
supply side, resource producers are increasingly able to deploy a range of
technologies in their operations, putting mines and wells that were once
inaccessible within reach, raising the efficiency of extraction techniques, shifting to predictive
maintenance, and using sophisticated data analysis to identify, extract, and
manage resources.
A new McKinsey Global
Institute report, Beyond the supercycle: How technology is reshaping
resources, focuses on these three trends and finds they have the potential
to unlock around $900 billion to $1.6 trillion in savings throughout the global
economy in 2035 (exhibit), an amount equivalent to the current GDP of Canada or
Indonesia. At least two-thirds of this total value is derived from reduced
demand for energy as a result of greater energy productivity, while the
remaining one-third comes from productivity savings captured by resource
producers. Demand for a range of commodities, particularly oil, could peak in
the next two decades, and prices may diverge widely. How large this opportunity
ends up being depends not only on the rate of technological adoption but also
on the way resource producers and policy makers adapt to their new environment.
Policy makers
could capture the productivity benefits of this resource revolution by
embracing technological change and allowing a nation’s energy mix to shift
freely, even as they address the disruptive effects of the transition on
employment and demand. Resource exporters whose finances rely on resource
endowments will need to find alternative sources of revenue. Importers could
stock up strategic reserves of commodities while prices are low, to safeguard
against supply or price disruptions, and invest in infrastructure and
education.
For resource companies,
particularly incumbents, navigating a future with more uncertainty and fewer sources of growth
will require a focus on agility. Harnessing technology will be essential for
unlocking productivity gains but not sufficient. Companies that focus on the
fundamentals—increasing throughput and driving down capital costs, spending,
and labor costs—and that look for opportunities in technology-driven areas may
have an advantage. In the new commodity landscape, incumbents and attackers
will race to develop viable business models, and not everyone will win.
While the changes facing resource
producers and policy makers are likely to be complex and numerous, the rewards
of greater productivity, faster growth, and a less resource-intense economy can
benefit all.
By Jonathan Woetzel, Richard Sellschop,
Michael Chui, Sree Ramaswamy, Scott Nyquist, Harry Robinson, Occo Roelofsen,
Matt Rogers, and Rebecca Ross
http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/how-technology-is-reshaping-supply-and-demand-for-natural-resources?cid=sustainability-eml-alt-mgi-mgi-oth-1702
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