Connect the Dots
Predicting the future is highly uncertain. The only feasible thing is to connect the dots and make a wild guess about the future. Based on a primitive understanding, I believe the following five global events would be a good starting point to connect the dots.
Wait!
A word of caution – The events listed below may vary for everyone. I am presenting my connecting dots only. ?
Let’s dig in.
Event#1 – World is at war.
The most influential event is happening between Russia and Ukraine. Its story goes back to Aug 1991 when Ukraine signed the Independence Declaration. Ukraine followed the independence path and chose to integrate with EU and NATO. After this, Russia has deep resentment against Ukraine and wishes to restore “Historical Russia” (with merging of Ukraine). This resulted in aggression between Ukraine and Russia which started in 2014 but open invasion of larger scale kicked off in 2022.
This has a huge impact globally on two aspects.
The first aspect is food. Ukraine was known as the breadbasket of Europe. The land available for farming earlier is now ravaged by war. This has reduced food production. Even this war disrupted the port functions. It has impacted the supply of food to poor countries of Africa. Thus, a huge impact is being felt across the world.
The other impact is on energy supply. Europe used to rely heavily on natural gas from Russia. After the war broke out, it put up a lot of sanctions on Russian import. This has impacted their energy source for heating, industrial processes, and power. This inadequacy in the energy source has led to a 15-fold hike in wholesale price of electricity and gas in 2021.
One way to tackle the grave situation in which the EU is stuck is to follow the path of renewable energy. It has floated ambitious green energy deals and targets. It introduced REPowerEU in May 2022 to focus on energy security and independence. It is also working to streamline permitting process, bringing structural changes in auctioning mechanism, infusing non-price criteria in the tender awards, and pushing for increase in domestic manufacturing industry.
The war would decide the relation between two countries and how they would operate in future.
Event#2 – Trade Restrictions
The COVID-19 pandemic and war has accelerated the push to attain self-reliance by countries. Such restrictions increased after 2020. Climate concern has led to restrictions on critical raw material (CRM) (such as Lithium, Cobalt & Nickel) whereas covid-19 pandemic has led to increased restrictions in the free flow of food & fertilizers.
Since 2009, CRM restrictions have increased five-fold along with 10% of global trade in CRMs now facing at least one export restriction measure. For example, Indonesia has banned nickel ore since 2020 and Namibia is imposing export ban on unprocessed lithium and other critical minerals (cobalt, manganese, graphite, and rare earth minerals).
By mid-July 2023, 68 restrictions on food, fertilizer and feed exists which was only one in 2022.
This situation has imposed a dilemma at the global level – whether to work together with free trade agreements or to work in silos with trade restrictions. Both sides have their own pros and cons.
Only the results of elections will tell what the ruling party decides in the future about trade. This brings us to the third event.
Event#3 – Elections
In democracy, an election decides the fate of its country. 2024 is a historic election year. Over 50 nations with 45% of global population will vote (national level) in 2024. The results of elections are highly awaited.
For instance, suppose Donald Trump gets elected as US President. As his inclination is more towards fossil fuel, the fate of clean energy is at stake. Even US IRA (Inflation Reduction Act) 2022 may be scrapped. Though it is debatable whether the law can be repealed by new President or not. ?
Also, new EU leaders may have a different approach towards support to Ukraine amidst war. This may change the scenario of Russia-Ukraine war. ?
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Thus, even though politics (and elections) are local, its impacts are global. So, keep an eye on the winning party and their manifesto. In a nutshell, future government policies would be included towards national security. ?
Event#4 – Supply Chain Trends
Due to the Red Sea crisis, the link between Europe and Asia is disrupted. It has become a hotspot due to Houthi attack on the commercial vessels. ~30 attacks have been done in the last 4 months. The Suez Canal (Red Sea) is critical as it handles 30% of the world’s container traffic. Due to the attack, market capacity has reduced, and shipping rates have increased. Even shipping time has increased by 2 weeks because of diversion through Cape of Good Hope (resulting in additional 4,000 miles).
This is leading to the adoption of innovative supply chain strategies such as reshoring, nearshoring and friendshoring by nations and companies.
Event#5 - Energy security and clean energy adoption
Energy security – to assure the availability of reliable and affordable energy supplies - is the central agenda. One way to attain energy security is through adoption of clean energy. The issue is that the basic elements (i.e., neodymium, dysprosium, and critical metals (Nickel, chromium, Manganese, Molybdenum) which form clean energy technology are rare in nature and concentrated in a few geographies.
China has dominance in critical minerals supply chain. And it’s not going to alter in the medium term. China has significant ownership in the mining of nickel in Indonesia, and mining of cobalt in the Democratic Republic of Congo. China is also eying on Africa through its "Go Out" policy" or the "Belt and Road" infrastructure endeavor.
Thus, attaining energy security is interlinked with CRM. So, countries need to strategize their CRM move.
In a nutshell
Even though we can just be a spectator for whatever happens in future, we can give it a shot to predict it through connecting the dots. I consider the above dots (or events) as the reference point. But it can differ for everyone. ?
The point is to make a list of your dots and stay updated on it.
(Disclaimer: The above expressed views are personal. It does not represent or promote any associated company’s viewpoint.)
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Senior Consultant at PwC- Management Consulting- Climate & Energy: Renewable Energy, E-Mobility, New Technologies, Strategy
1 年A nice and wonderful piece of thought, as you said, the list would differ from person to person. I would elaborate your 1st point further to war crimes and threat to right to live that is happening in Palestine for more than 6 months, in current time and for more than 70 years in total. So again, if you magnify, there are two parties which are actually involved (I) America supporting Israel directly and Russia supporting smaller groups on Palestine side. Economics says its marketing of their arms
Founder at NFSE
1 年Sensible!
Energy & Environment | Energy Transition | Market Entry and Expansion | Business Transformation
1 年+ Fed rates