Goldman’s Jeff Currie: It’s a Commodities Supercycle, and We Still Haven’t Hit Max Pain

Episode Summary

Executive Summary: The episode centers on Goldman commodities chief Jeff Curry’s thesis that markets are in a true commodity super cycle driven by strong demand, chronic underinvestment in the old economy, and policy shifts around redistribution and decarbonization. He argues tight supply in oil, gas, coal, metals, and shipping is compounding across markets, creating persistent scarcity pricing and elevated inflation risks.

Main Topics: Why commodities are in a super cycle (Priority: 5/5): Jeff Curry argues this is not just a bull market but a super cycle because demand growth is structural and broad-based across physical markets, not just a temporary price spike. Underinvestment in the old economy (Priority: 5/5): Capital has been redirected from fossil fuels and other traditional industries toward tech and new-economy assets, leaving energy and metals producers without enough capex to expand supply. Energy shortages and cross-market contagion (Priority: 5/5): Oil, coal, gas, and metals shortages are reinforcing each other globally; shortages in one market force substitutions that tighten others, creating a chain reaction. ESG and decarbonization as cost-of-capital issues (Priority: 4/5): Curry says ESG matters, but the core issue is poor returns and higher capital costs for old-economy sectors; decarbonization policy and legal risk in Europe further discourage investment. China as the epicenter of commodity stress (Priority: 4/5): China’s coal, aluminum, and energy constraints are presented as the starting point of broader global tightness, with knock-on effects on LNG, oil, and industrial metals. Oil market discipline, OPEC, and shale (Priority: 4/5): OPEC’s current discipline and the changed incentives in U.S. shale mean producers are prioritizing returns over volume, so supply response is slower than in prior cycles. Inflation driven by volumes, not just prices (Priority: 5/5): Curry distinguishes physical commodity markets from financial markets, arguing that inflation and commodity booms require broad-based volume demand, especially from lower-income groups.

Key Arguments: Commodity tightness is more severe than anticipated because multiple markets are simultaneously constrained, not just oil. The oil deficit is so large that neither OPEC nor U.S. policy can quickly fix it. Underinvestment in the old economy is the root cause: weak returns redirected capital away from energy, metals, and related supply chains. ESG is partly a factor, but the main barrier is that investors remember poor returns and demand higher hurdle rates before funding new projects. OPEC’s current strategy of maintaining backwardation and low inventories is rational and far more disciplined than in past years. U.S. shale no longer behaves as a swing producer because companies and investors now prioritize free cash flow and return on equity over production growth. China’s coal shortages and carbon constraints have pushed the country to substitute into gas, LNG, and then oil, exporting tightness globally. A commodity super cycle requires structural demand growth in physical volumes, which Curry links to redistribution policies, job creation, and rising consumption among lower-income populations. Scarcity pricing means even small disruptions now create outsized price spikes because the system has little slack.

Data Points: Latest CPI: Slightly hotter than expected - Joe and Tracy open by discussing the recent U.S. inflation print. Measured oil deficit: ~4.5 million barrels per day - Curry says the market was running in deficit at the end of last month. Oil deficit as share of market: Nearly 5% - Used to illustrate how unusually tight the oil market is. Copper inventory decline: 8% to 10% week after week - Curry describes unusually rapid inventory drawdowns in copper. Oil price during summer peak: $80 per barrel - Referenced as a level that briefly lured investors back into the sector. Oil price after late-August selloff: $65 per barrel - Curry cites a sharp pullback that hurt returning investors. Oil price at time of interview: $83-$84 per barrel - Current market level discussed in the conversation. U.S. human infrastructure fund: $3.5 trillion - Curry uses this as evidence that redistribution policies became much larger than expected. U.S. Recovery Act: $1.9 trillion - He contrasts the enacted size with earlier expectations of $1.1 trillion. Earlier expected Recovery Act size: $1.1 trillion - Shows how policy stimulus exceeded forecasts. Fossil fuels share of S&P 500: 2.5% - Curry says the sector has shrunk dramatically versus the late 1970s. Fossil fuels share of S&P 500 in late 1970s: ~20% - Historical comparison to show the sector’s decline. Industry wealth destruction: 10 to 20 cents, possibly 30 cents, lost per dollar - Curry describes the value destruction from the prior volume-growth strategy in U.S. shale. Shell legal liability: Scope 3 emissions liability in Dutch court - Used as an example of ESG/legal risk increasing capital costs in Europe. India coal stockpile: 3 days of coal stocks - Curry cites this as evidence of dangerous energy fragility. China coal capacity cut: 2 million metric tons - China reduced aluminum capacity under carbon constraints. China aluminum market size: 50 million metric tons - Provides scale for the 2 million metric ton cut. Mongolia coal exports potential: 300,000 tons - Potential near-term relief for China’s coal shortage. U.S. oil target: $90 per barrel - Goldman’s near-term price target, with upside risk noted. Copper forecast: $11,000-$12,000 per ton - Goldman’s next-year copper outlook, again with upside risk.

Pivotal Quotes: "This is like, you know, the train is off the track and you're watching it in slow motion" — Jeff Curry: Describing the scale of the oil deficit and why it cannot be quickly solved. "It's the revenge of the old economy" — Jeff Curry: His shorthand for the underinvestment thesis behind commodity tightness. "Physical markets driven by volume, financial markets and GDP driven by dollars" — Jeff Curry: Explaining why commodity super cycles depend on real consumption scale rather than price alone.

Implications: Listeners should expect persistent volatility, not a quick normalization. Tight supply, underinvestment, and ESG/decarbonization constraints suggest continued inflation pressure, especially in energy and industrial metals, with scarcity spikes likely to recur over the next few quarters.