Latest / Look Forward / Episode 3: Market Insights, a Conversation with Dave Ernsberger

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Episode 3: Market Insights, a Conversation with Dave Ernsberger · Look Forward

0:06
Hello, my name's Critchlow.
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I'm head of news at S&P Global Commodity Insights, and welcome to the
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Look Forward Podcast from S&P Global.
0:15
In today's rapidly shifting Markets success depends on
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anticipating what's next.
0:20
The professionals who excel are those who can spot emerging trends
0:24
before they fully materialize.
0:27
Look Forward podcast delivers exactly that insights to help you prepare for
0:32
tomorrow's opportunities and challenges.
0:35
We bring you expert perspectives on macroeconomic trends, capital markets,
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energy transition, and global trade.
0:43
With a sharp focus on what these developments mean for the decisions
0:48
that will shape your tomorrow.
0:50
This podcast connects you with S&P Global's Look Forward council bringing
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cutting edge research on long-term trends and transformative market shifts.
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Together we are committed to providing the forward-looking intelligence you need
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to navigate uncertainty with confidence.
1:10
Welcome everyone to the Look Forward Podcast and joining us today for this
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episode in the heart of London where we're recording is Dave Ernsberger,
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co-president of S&P Global Commodity Insights, and a man who has put an
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indelible mark really on the world of price reporting of commodities.
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Began your career in 1996, I believe.
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Yeah, that's right.
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And, you know, really has, has reported.
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Held senior leadership positions in the company through really a kind of
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a dramatic time in commodity markets.
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And I was looking at where the oil price was in 1996.
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$9 I'm guessing?
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No, a little bit more.
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$22.
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Oh, okay.
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About, but actually if you, if you adjust that for inflation.
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That's $45 in today's money.
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I really have been doing this a long time, if that's what inflation
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has done to the price of oil.
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Oh my God, yes.
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Well, if you work backwards, I think we're at $70 a barrel dated Brent at the moment.
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Yep.
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Um.
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That would be worth $34 barrel in 1996.
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Interesting.
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Yeah.
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Yeah.
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But interestingly as well, 1996, there was another major technological innovation
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that changed the world, just like AI is today and, and energy, and I know we're
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gonna talk about that a little bit.
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The inventing of the invention of the printing press.
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The USB
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Oh, okay.
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Oh,
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The USB stick.
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Very good.
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Which changed computers forever.
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Dave, thank you for joining us.
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Yep.
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You were recently.
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and it's, you know, it's good that we started on oil and oil prices
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because I know that you were recently at the OPEC International seminar
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Yeah.
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In Vienna.
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Yeah.
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A kind of who's who of the global oil, gas, and energy industry
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coming at a very interesting time.
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Of course, 2025 has been anything but dull.
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What was the, the mood, vibe that you picked up from, you know, fellow
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industry leaders that were attending?
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So it's interesting, we actually started the podcast with a little bit of a
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look back on 96 inflation oil prices.
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I think the last time OPEC put a, explicit price target in place was around 19.
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It was actually.
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2001, 2002 when it said it was looking for a price.
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This is before your time.
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Yes.
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They were looking to, to stabilize the oil market within a range of $21 to $28
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a barrel, which I'll always remember because, you know, back in 2001, 2002,
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that felt, you know, pretty bold.
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Pretty ambitious, to be thinking of $28.
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Of course now we've been living in a world of 70, but to your
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point about inflation adjustment.
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Where we are today is closer to 34 in those terms.
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Right.
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So it's, it's pretty interesting to think about that.
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And the reason I harken back to that in answering your question is because, at the
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international seminar in Vienna, it struck me that in my 30 years of looking at
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these markets, OPEC has rarely, if ever.
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Been quite so successful in delivering against its self-declared
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targets and its undeclared targets.
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In terms of, you know, it's the goal of its actions in the,
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in the oil markets especially.
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So, OPEC has rarely, if ever been this successful and at the same time.
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At the event, I sense that OPEC is, is also simultaneously, at a, at a kind of an
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unprecedented level of sensitivity around the conversation around what it's doing in
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the market and what its members are doing within the organization, both the members
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and the, the, group of countries that surround it through the plus structure.
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So OPEC is simultaneously very successful and very sensitive
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to commentary right now.
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And I was reflecting on that, you know, after Vienna and actually
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getting ready for this podcast.
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And I suspect what we're seeing is, you know, OPEC is both responding to
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the way the world is around it today.
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You know, everybody.
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The, the line of demarcation has shifted from setting the scene for a discussion
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to trying to control a narrative.
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I think we're in an era of trying to control a narrative, and I
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think OPEC is responding to that.
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Just like other organizations and governments and so on want to try
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and control a narrative instead of influence a narrative, let's say.
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Which it needs to work through.
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I think as an organization, what is its position really going
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to be around, the discussion.
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Because if you're gonna host a seminar with a lot of international
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delegates, you need to let them speak and see what they have to say
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and let the reporters report, right.
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And the other thing that strikes me about it is maybe the price
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of success is that you have to re reevaluate your position in the world.
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And I don't think OPEC has quite found, peace yet.
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With, the fact that it now controls, I think, more than half of the crude
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oil production in the world, and therefore its relevance is at a all
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time high and it's gonna attract an all time high level of commentary.
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So fascinating.
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Yeah, and it's, it's, it's not just the volume of crude on the water
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that OPEC now, has sort of direct policy influence over, it's the
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broad spectrum of grades, right?
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You know, it used to be just that medium sour very Middle East
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focused bucket of, of crudes that,
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yeah.
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the group used to control.
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But now with the inclusion of Russia , OPEC+, it's the full
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spectrum that we would look at.
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Yeah.
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You know, OPEC has managed to bring back its oil production, far, far faster than
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it said that it would, and that the market thought it could, and it's done that
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without driving the price of oil down.
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In fact, oil is still around $70 in nominal terms as we speak today.
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And I dare say it will be for, you know, when people are listening to this podcast
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if they listen reasonably soon anyways.
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So it's remarkable the success they've had and, and even bringing
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their own production back.
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And I think it's that, diversity of grades and, and more.
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You know, nuanced understanding of the relationship between
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heavy and medium versus light that even the organization has.
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So, yeah, I agree
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And I agree with you that it has been successful, especially if you look at it
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in the context of the current environment because, you know, certainly from my
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experience as a journalist, I can't think of a three, four year period where
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we've had so much geopolitical risk.
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Sure.
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Where we've had major, sea lanes virtually shut down to shipping, where we've had.
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Tankers literally sunk on the water.
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And if the group hadn't had that, that spare capacity, then you
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know, where would oil prices be?
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Now add into that the trade policy uncertainty that we've seen this year.
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yeah, and I'll say, Andy, just to kind of bookend that is I'm not necessarily
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sitting here celebrating OPEC per se.
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I think we're just saying OPEC has a set of goals.
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It appears to be delivering very successfully against them.
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Which is remarkable actually.
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Yeah.
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But coming back to this issue of volatility.
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What else do you ex do you think explains the way markets have been able to absorb,
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you know, these very volatile events, which normally, you know, if I think about
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20 years, you know, yeah, it was anything like this would've set the market racing.
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I think there are probably two other features of the oil markets today and.
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To some degree natural gas, LNG, other commodity markets.
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But I think oil is the most advanced in terms of just length
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of experience, exposure to these sorts of issues and so on.
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One of the two other factors is that, we've been through, the pandemic,
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the post-pandemic, the invasion of Ukraine, a number of massive
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disturbances that have actually.
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Gotten the markets match fit for disturbances, so the entire rewiring of
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trade flows, shipping, and everything else, around each of those events
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actually, but especially the war in Ukraine most recently, you know, the
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turning of ships around the reversing of, of trade flows and everything else.
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The redirecting of cargoes from Russia to India, for example, it's
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kind of created an elasticity, that's always been there to some degree,
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but maybe hasn't been fully fit.
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And is now fully fit.
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So, you know, the market is just able to respond and react very quickly.
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At one point there were tankers queuing up to go through the Straight
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of Hormuz during the 12 day war, and yet the price of oil barely moved.
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And the beginning of the queuing up of ships might have induced a sort
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of a panic in, in other times, five years ago, 10 years ago, 15 years ago.
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Another second factor we've been looking at is.
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The world of risk management, the trading of futures and options is
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a lot more, let's call it diverse and, spread across geographies and
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locations and, and, trader types.
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You know, 20 years ago we had, NYMEX, WTI and Ice Brent, in terms of futures
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contracts related to physical markets.
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Now we have those two contracts plus INE in Shanghai, which
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has a lot of volume on it.
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GME in Dubai, IFAD in, Abu Dhabi.
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and there are just, and of course there's, there's Dubai futures
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themselves, which trade pretty actively.
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So there's a much greater array of tools for risk management that allow,
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you know, we were talking earlier about the diversity of grades.
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crude oil on the market, but also a diversity of contracts
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in the futures market.
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And in the sense that physical and futures markets need to interrelate
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effectively to manage basis-risk, location-risk, and other kinds of risk.
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It's a much more sophisticated world in 2025 than it was in 2005.
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It's a very good point.
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And I guess tied to that level of sophistication we
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see in the market now is data.
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You know when I see reporting on the market is the market's
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much more hungry for data.
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And whether it's actual, you know, numbers produced by institutions tracking the
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market, whether it's ourselves, we track the market, whether it's, you know, really
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interesting tools like commodities at sea, maritime Intelligence Suite that
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we use to track tankers on the water, the market and participants now they
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have much more data that they can use to make an assessment.How Impactful do
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you think that that is, in terms of,
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Yeah, it's actually thinking about what you're saying there, I think that could
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be having a pretty big effect on dampening volatility as well, because I grew up in
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a world of buy the rumor or sell the fact.
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That was always the cliche among the trading community.
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I've never traded anything as a reporter, but you know, you
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would talk to people about what was going on with price volatily.
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They say, well, you're buying the rumor and then you're selling a fact, right?
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Mm-hmm.
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Well, in a world where everybody knows everything instantaneously.
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Where's the rumor?
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There's no space for a rumor, right?
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It's pretty much, I mean, I'm not suggesting we're living in a
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world where we're overwhelmed by facts either, but we certainly
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have plenty of data to your point.
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Right?
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So we knew exactly how many ships were queuing up, how long they'd
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been queued for, how fast, how fast they were moving, right?
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And you wouldn't have known that 20 years ago, there would've been a lot
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of, scuttlebutt going on around which tankers were doing what, and it'd
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be a lot of word of mouth happening.
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So yeah, maybe the, the vast availability of data and the AI enhanced methods
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for, parsing that data might be also kind of weirdly, in some ways
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leveling off that volatility as well.
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Now, you talked a little bit about this at, CERAWeek, which you were
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at, at the beginning of the year.
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Major, energy convention, for S&P Global in Houston.
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Brings together global leaders again from oil, gas, energy, commodities.
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And you highlighted this convergence of big tech and big energy and, I wanted to
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kinda ask you how you see AI, reshaping really the world that we work in.
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Yeah.
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CERAWeek is, is a massive opportunity for different kinds of
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leaders to get together and have conversations that are in the moment.
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And this year, as you rightly say, was another great example of that.
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What struck me as being pretty wild and pretty new was we had
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big tech in the room, at CERAWeek.
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Senior leaders from big tech, making demands of big energy.
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And I, I'm not sure.
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I'm not sure that oil and gas suppliers, power, utilities, transmission
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operators, have ever really faced off against these kinds of leaders before.
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Because you know, where, where it was then was Big tech wants answers
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now and energy was like, well, we'll, you know, we'll start working on it.
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And big tech was like, that's not fast enough.
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You know, we want to build our data centers now.
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There's an AI arms risk going on with China right now.
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We need, we need energy dominance in the US to deliver against that.
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Of course, CERAWeek being in Houston is kind of the home of a US, in a way,
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a US centric conversation, even though it's very internationally attended.
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In the time since then, two pretty interesting things
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have happened in my mind.
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Number one is that the, the, the builders of the data centers have begun to,
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solve those problems for themselves.
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So they've begun to talk about, of course, ways to deliver AI more efficiently.
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you know, since then we saw the Deepseek thing happen.
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We saw, we saw more efficient ways of delivering ai.
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And the other thing that's happened is they've started to
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look more internationally at what other solutions could be.
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What, where will they build data centers elsewhere?
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Will they go to more, conducive environments for
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investment and infrastructure?
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So the conversation has evolved and evolved, and it will evolve again.
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Diversifying itself internationally, and of course doing what markets
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always do, which is if it's not supply, find a way to economize demand.
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And I, I think it's pretty interesting cause over the next two
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or three years, there's some big decisions to get made about where
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will people build, power supply?
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Where will they build, you know, electricity production, and to some
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degree transmission, expansion.
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And then what timeline will that be delivered on?
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And will the demand still be there?
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When it arrives, we're either gonna live in a world of perfectly delivered billion
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dollar investments or problematically delivered stranded investments.
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And I think that's pretty interesting to see.
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Because the countries that control the commodities and, and the energy at the
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moment it's in interesting that they are some of the biggest investors.
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In this AI technology, and it's not just through their sovereign
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wealth funds, it's actually we want the data centers in our country.
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So you look at Abu Dhabi, right?
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They're investing heavily in this.
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That's right.
14:49
That's right.
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So there, there, there's, that's kind of where that international
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diversification tends to come from is I think the countries that have.
14:56
The available power supply are saying build your data centers here.
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And in a world of tariffs and, and, the trade negotiations that the US
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is leading right now, that creates a new environment for the tech
15:07
companies to be thinking about as well.
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Do they really wanna do that or not?
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Right?
15:09
Yeah.
15:09
There's a, a political aspect to that question, I think.
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I mean, I've, I've read this comparison between the petrodollar states declining
15:17
and the rise of the electro dollar states.
15:19
Electro dollar.
15:20
Okay.
15:20
I think it's far more nuanced.
15:21
I think that the petro dollar states want a bit of that electro pie still.
15:25
So.
15:26
That sounds like a dangerous thing to be eating.
15:28
Yeah, yeah, yeah.
15:29
Yeah.
15:29
You might get burnt.
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The, I mean, it brings us as well to this subject of energy transition,
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which, you know, I remember I think four years back at, at CERAWeek.
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Everyone wanted to talk about energy transition and then the following
15:44
year it just kind of flipped.
15:46
And all the old companies, and a lot of the energy comport or energy
15:50
companies there really started to change the narrative around, well,
15:56
where does the energy come from?
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Long term energy security, of course.
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And that, you know, the conversation is more nuanced
16:04
around climate change and, and, and mitigating, the release of carbon.
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Where do you see that going?
16:13
So I think in 2026 and beyond, we will move beyond the energy
16:18
transition conversation and into the, next phase of energy expansion.
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And this is where the nuance you're talking about becomes really important.
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I think the investments will continue to flow into ways to generate
16:31
electricity that are fairly novel, at least in historic terms, right?
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So, wind, solar, other sort of forms of renewable energy will be the
16:40
centerpiece of energy expansion.
16:43
But this world of transition that we've been talking about for the last, let's
16:47
call it five years, certainly 10 years possibly, is kind of coming to an end.
16:52
And the problem with the transition concept is it sort of suggests you're
16:55
shutting down One thing as starting up another, and what has become
16:58
very clear in the last couple of years is that to meet the demand for
17:01
energy in the world over the next 15 years, we're gonna need all of that.
17:05
Actually, we're gonna need all of the core energy we have today.
17:07
We're gonna need all of the, the oil, the natural gas, especially the nuclear.
17:11
And we're gonna need to build on top of that, these alternative forms of energy.
17:14
So it's all about expanding energy as opposed to transitioning from
17:17
one kind of energy to another.
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And I think as that idea catches on, that will drive, I think.
17:23
You know, rewarding in terms of financial reward, ROI, investments into expansions
17:29
in energy technologies and some of the spaces that need them the most as well.
17:32
So I think we're going to get a slightly different kind of
17:35
balance conversation around that.
17:37
And, and in that world, you know, growth and demand for hydrocarbons
17:40
will be slower, but it will be there.
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And the growth and demand for non hydrocarbon energy will be
17:45
faster, and that's gonna be the focus of investment to some degree.
17:49
Energy evolution replaces energy transition really.
17:52
Yeah.
17:52
Evolution and expansion, I think.
17:54
Right.
17:54
Yeah.
17:55
That said, you know, we are doing some interesting things at S&P Global in
17:59
this space of energy transition still.
18:01
Sure.
18:01
And especially in carbon.
18:02
Yep.
18:03
Which is the key issue around climate change and, and reversing global warming.
18:09
Um.
18:10
You've championed the development of carbon, accounted pricing
18:14
and registry infrastructure.
18:16
Where do you see that going?
18:17
Where do you see it evolving as a key part of the kind of mechanics
18:22
of how the commodities world works?
18:25
So, one of the most important attributes of the carbon markets, both the
18:30
compliance carbon markets and the voluntary carbon markets, and here
18:33
we're talking about the market where you generate certificates for, abating
18:37
or removing carbon, from production supply chains, is that it helps bring
18:43
the global effort together, to mitigate, you know, the carbon impact of energy
18:48
on the world and, you know, higher, more difficult to abate industries.
18:52
Cement production is a classic example, there are others out there, have an
18:56
opportunity to offset or, account for what they're doing by, buying credits,
19:03
from areas that are making deliverable efforts to remove carbon or abate carbon.
19:07
So the economic premise is really important.
19:10
Because it, it creates a global dynamic trading environment to, you know, move
19:15
capital around, get it from where it is to where it needs to be to advance
19:20
efforts to decarbonize and abate carbon.
19:22
So that premise is important.
19:24
That's why we've been working really hard at S&P Global.
19:27
And then commodity insights around carbon accounting for cargoes of LNG
19:31
and crude oil for that matter, aluminum and other products in the marketplace,
19:34
in different supply chains and registries for storing, carbon credits.
19:40
And assessing the value of these credits in the marketplace.
19:43
These are things we've been working on very hard for 15 years.
19:46
In the case of the registry, six years in the case of the markets themselves
19:50
and where we are today is, you know, there's a clear, very strong desire to
19:55
take the learnings from the last 10 years in these very, very new markets that
20:00
have an, that have a viable and important economic reason to exist, but do not
20:05
yet have not demonstrated at least the.
20:08
the transparency, the credibility, and the confidence that the markets
20:14
need to, to develop and grow further.
20:16
So there's an opportunity here to be, clear and more vigilant,
20:20
well in the market in general.
20:22
And the people who participate in those markets around what the meanings
20:26
are of these certificates, what the values are of these certificates,
20:28
and for the way that they're traded, well actually produced, traded, and
20:31
retired to be, you know, to withstand the highest levels of public scrutiny.
20:36
And that's kind of where we're at.
20:37
And what's interesting about carbon markets to me, as someone who's been
20:40
in this for a while, is when you see a new market emerge, it always
20:44
goes through a kind of an initial flourishing and an excitement.
20:47
Then you see some cracks in how it's designed and it needs to go through
20:49
a reformation of sorts, and that's where carbon markets are today.
20:53
And it, it adds that tangible element to it.
20:55
I think that where carbon markets and the, the climate change debate has
20:59
suffered in the broader general media with the broader general population.
21:03
Outside financial markets and commodities trading is, it's difficult
21:07
to, you can't go out and buy it.
21:08
You can't go and buy a ton of carbon.
21:10
You can't go, well, you can in markets, but yeah,
21:13
In some, in some markets you can, and then you can try and
21:14
make fibers from them and stuff.
21:16
But the more typical way to trade 'em is that certificates.
21:18
Yeah, we, we we're actually adding that.
21:20
We are making it tangible.
21:22
Yeah.
21:22
And, and I think that's a really important thing going forward.
21:25
I think there's a long way to go with carbon markets and, you know.
21:28
In with the Platts benchmarks, for example, we've done
21:31
this in oil and natural gas.
21:32
We've done this in LPG, we've done this in chemicals, and we'll do it in carbon
21:36
too, in terms of working with the industry to help define standards, practices, ways
21:42
of trading, you know, accepted ways of valuing, and that's what makes it exciting
21:46
for this generation of price reporters.
21:49
Absolutely.
21:51
First take, S&P Global Commodity Insights launched this.
21:55
At the beginning of this year.
21:57
Yeah.
21:57
Instant messenger delivered instant analysis.
22:01
Coming back to what we discussed earlier in the podcast around
22:05
the growing importance of data.
22:07
It's not just that that markets are looking for, and market participants are
22:10
looking for, it's this, this context.
22:13
What does it mean?
22:14
Do you see more opportunities in, in being quicker in delivering, delivering
22:20
that kind of analysis at at speed?
22:22
Yeah.
22:22
I think so.
22:23
I mean, I think what our customers prize more highly than anything, because
22:32
our customers tend to be living and operating in a very dynamic, real
22:36
time environment is the minimizing of the time between event happening
22:42
and credible authoritative source, giving an input as to what it means.
22:45
And you know, even in 2025 when.
22:49
Most of our customers have incredibly advanced AI solutions of their own
22:53
good analytical teams of their own.
22:55
A third party perspective on what something means is
22:58
really important even now.
23:00
And what I've heard from talking to people in the industry and the market is they
23:04
value what commodity insights has to say.
23:06
They want to hear from our researchers and our.
23:09
They wanna hear from the press reporters and, and, and, and,
23:11
and many more beyond that.
23:12
But they want to know now.
23:14
You know, and we live in a, you know, a TikTok generation.
23:18
We live in an Instagram generation.
23:20
The traders that are coming up now grew up in a world of, of
23:23
real time social media, right?
23:26
So we have to evolve the way we're telling people with credibility what we think
23:30
things mean, to respond to the appetite for two things, speed and brevity.
23:35
Like people don't have an attention span to read a. 1200 word, evaluation of
23:42
something three days after it happened.
23:44
By then they've also been traded 17 times.
23:46
Right?
23:47
So, and there's still a space for that for certain groups of people in
23:51
strategy and elsewhere, but people want to know now, and they wanna
23:54
know quickly what something means.
23:56
And it's that mobility issue, you know, the mobile device, it, you
23:59
know, we, we certainly haven't reached saturation points in terms
24:02
of markets, participants, traders.
24:05
Yeah
24:05
Our kind of customers that they want that information via.
24:08
Yeah.
24:09
And, and what I love about that, Andy, is we're also putting the onus on our
24:14
own experts within our own business.
24:16
To be responsive to something happening.
24:19
Just like our customers, our, our experts don't really have the time
24:23
to pontificate and reflect too much.
24:26
They should reflect before they put anything out in the, in the
24:29
market, but you know, they need to move with with time, right?
24:32
So, you know, reporters and researchers and analysts also, have become more aware
24:37
that it's, it is, it's probably okay to think about what something means, get
24:42
input from people, but then speak into a camera and say what it means, you know?
24:46
Of course.
24:49
To finish, you know, some, as a journalist, normally you, you ask the
24:53
question, you know, what's the big worry, what's the big fear for this
24:57
for, for, for the rest of this year?
24:59
I'm gonna flip that on its head.
25:00
I'm gonna ask you, Dave, you know, what are you optimistic
25:03
about the remainder of the year?
25:05
Both, you know, in terms of the business, but also in terms of
25:07
commodities in the markets that we cover.
25:10
I am incredibly optimistic that we have been through, historically high levels
25:16
of uncertainty, and yet the commodity markets have not burned out themselves
25:23
or, or burned out the global economy.
25:26
And when I look forward from here, and I see to take a bunch of random
25:31
examples, let's say the de-escalation of the Israel-Iran conflict.
25:36
The beginning of the establishment of trade deals between the US
25:39
administration, the EU just got inked in the last couple days.
25:42
There'll be more to come for sure.
25:43
UK was done a while ago now, that as we move out of this historic period
25:48
of uncertainty, and now I'm saying uncertainty, not volatility, right.
25:51
And into what will.
25:52
By definition be greater certainty.
25:55
I think that the, economy that we serve, the industry as a whole and
25:59
even our own business will have learned a lot, and will be more confident
26:04
to move forward on some of the, the, the traject trajectories that were in
26:08
place, a year ago and, but move forward with more acceleration and more force.
26:12
Because I think the first six months of 2025 stress tested
26:17
a whole bunch of hypotheses.
26:18
Some of them, have been put by the side, but most of them carry on.
26:22
The world has proved, proven to
26:23
be far more resilient than I think probably any, any of us thought.
26:27
Yeah, that's rights, right?
26:28
And I think that's great cost from optimism.
26:30
Yeah, absolutely.
26:31
A great note to end today's podcast on.
26:34
Thank you so much, Dave for joining us.
26:36
It's been an absolute pleasure.
26:38
And, tune in again for our next episode.
26:40
Thank you, Andy.
26:41
Thank you.