The Commodities Super Cycle: How to Invest Like Rockefeller

I remember my father yelling at me during my adolescence, whenever I turned our home’s thermostat above 68 degrees in winter: “Turn the heat down! Who do you think I am? Rockefeller?”

Not even close, Dad. But imagine if you had been able to invest in Standard Oil back at the dawn of the petroleum and automobile industries in the early 20th century. You’d have become a massively rich oligarch along the lines of John D. Rockefeller.

At its peak in the year 1904, Rockefeller’s Standard Oil controlled 91% of oil refinement and 85% of final sales in the United States.

The company’s value that year exceeded $1 trillion. Rockefeller retains the title of richest American in history; he amassed a personal fortune of $410 billion. Both figures are in today’s money, adjusted for inflation.

The multi-billionaire oil baron could have told you that one of the surest ways to build wealth is to get on the ground floor of a raw material that’s transforming society. And despite the concerted efforts in recent years of governments around the world to transition away from fossil fuels, crude oil remains the world’s most valuable commodity.

As the second quarter of 2024 gets underway, we’re seeing the increasing prevalence of a commodities “super cycle.” The prices of essential raw materials such as copper, iron ore, aluminum, and cobalt are surging, driven by a convergence of factors.

The term super cycle refers to an extended period during which commodity prices experience significant and sustained increases, driven by fundamental shifts in supply and demand. Unlike short-term fluctuations, super cycles are characterized by their longevity and breadth, often spanning several years or even decades. They typically arise from structural changes in the global economy, such as rapid industrialization, technological advancements, or geopolitical shifts.

At the heart of the current super cycle lies accelerating global economic growth, fueled by the rise of a burgeoning middle class in emerging economies. Countries such as China, with its vast population and insatiable appetite for resources, have become the primary drivers of demand for commodities.

As optimism about China’s economic growth in 2024 increases, so too does the expectation of increased consumption of raw materials, particularly crude oil. China is the world’s largest importer of crude oil, consuming about 14 million barrels per day.

The prices of West Texas Intermediate (the U.S. benchmark) and Brent North Sea crude (the international benchmark) have been climbing and both currently hover near $80 per barrel. Accordingly, the top-performing sector in the first quarter of 2024 was energy.

However, this surge in commodities demand comes at a time when supplies are tightening, exacerbating concerns about global scarcity. Geopolitical tensions, supply chain disruptions, and environmental challenges have all contributed to a squeeze on the availability of key commodities. From the closure of mines to trade embargoes and natural disasters, the specter of scarcity looms large, driving prices ever higher.

As you can see from the following chart, the commodity total price index climbed by 3.5% in the first quarter of 2024 compared to December 2023:

The threat of global warming has added another layer of complexity to the commodities market. As temperatures rise and extreme weather events become more frequent, the agricultural sector faces mounting challenges in maintaining production levels.

Droughts, floods, and heatwaves threaten crops, leading to disruptions in food supplies and inflationary pressures. This, in turn, impacts the prices of commodities such as wheat, corn, and soybeans.

The Russia-Ukraine war also has weighed on agricultural production. Ukraine is a major wheat exporter and its production of this staple crop has been severely disrupted.

It’s Not Easy Being Green

The transition to cleaner, alternative energy is a laudable goal, but the adherents of “going green” tend to underestimate the large degree to which these advanced technologies require raw materials that are in short supply.

The production of green energy components, such as solar panels and electric vehicle batteries, relies heavily on commodities such as lithium, silver, and cobalt. This burgeoning demand for green commodities has added another bullish dimension to the commodities super cycle.

Gold remains a steadfast anchor for investors seeking refuge from unforeseen crises, such as a resurgence of inflation or worsening geopolitical strife. Historically viewed as a store of value and a hedge against inflation, the “yellow metal” should continue to play a vital role in our portfolio.

There are many ways to invest in commodities, including individual equities, physical ownership, mutual funds, hedge funds, and exchange-traded funds (ETFs). Your choice depends on your investment goals, stage of life, and tolerance for risk.

Another compelling hedge is cryptocurrency. That’s right, crypto.

As central banks move markets via monetary policy decisions, investors have sought refuge in decentralized assets such as Bitcoin (BTC) and Ethereum (ETH), which are perceived as immune to government manipulation and control.

Additionally, advancements in blockchain technology and decentralized finance (DeFi) have expanded the utility and functionality of cryptocurrencies, attracting a broader audience of investors and users. The SEC’s green light this year of Bitcoin-linked ETFs also has fueled crypto’s rise.

Every portfolio should have exposure to crypto. But you need to be informed, to make the right choices. The good news is, the experts at Investing Daily have done the homework for you.

Want to tap crypto’s massive money-making opportunities? Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

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This article previously appeared on Investing Daily.