The four horsemen of the commodity apocalypse – or just another Evans-Pritchard winter?

Ambrose Evans-Pritchard's latest column in the Times has four horsemen galloping in together: the wars in Iran and Ukraine; the tightly interlinked markets for oil, gas and grain; an El Niño building in the Pacific against a backdrop of resource nationalism; and the AI investment blitz, which is swallowing energy, copper, water and capital all at once. Feeding on each other, he argues, they're driving a commodity spiral that will end in an inflationary blow-off, and he signs off by saying he has rarely felt such foreboding heading into winter.

To be fair, he isn't inventing things. The Iran war produced one of the biggest oil supply shocks on record, and Bloomberg's own index team reported their commodity index up 24% by the end of the first quarter, with energy doing most of the lifting. They also made the obvious but important point that dearer energy seeps into the cost base of every business going. Oil drags fertiliser, freight and plastics up with it, and grain follows because vegetable oils get turned into biofuel.

But Futures aren't prophecies

His strongest evidence is the futures curve. Brent above $90 out to spring 2027, European gas futures at three times last winter's level, and grain markets in contango, where tomorrow's price sits well above today's. It all sounds ominous, but a futures price is just a bet placed by traders who are nervous right now. In 2022 the curves also priced in years of eye-watering gas prices, and within eighteen months wholesale prices had fallen back hard. Markets are very good at extrapolating the present and rather bad at anticipating the moment when high prices kill off demand, which is precisely what high prices tend to do.

The fourth horseman is the interesting one

Data centres competing with households for electricity and water is a genuine issue, and one that will land locally, in planning rows about substations and reservoirs, long before it shows up in any global index.

He frets that AI is soaking up the money governments need to fund their deficits. Maybe so, but you could also read that as a long overdue bit of discipline. For fifteen years governments have treated borrowing as more or less free. If they now have to compete with the private sector for savers' money, that isn't an apocalypse, it's a return to normal, and it might force the odd hard choice about spending priorities.

Final thoughts

None of this means we should be complacent. If oil stays high it'll be felt in energy bills, the weekly shop and ultimately interest rates, and the people who feel it first will be those with the least slack. But doom sells papers, and a columnist who predicts catastrophe every year will eventually be right about one of them. I'll be keeping an eye on the gas price this winter, but I'm not stockpiling tins just yet.