Rosenlicht Predicts Era of Resource Scarcity to Favor Active Energy Investment

Tyler Rosenlicht argues that the world has entered an era of resource scarcity that will reward active investment across traditional and alternative energy sources. Rosenlicht argues that structurally higher demand for energy, metals and resources is confronting years of underinvestment, fragile supply chains and geopolitical tension. Rosenlicht views scarcity as a defining feature of the next decade rather than a temporary phase.

Rosenlicht writes that supply disruptions and geopolitical conflicts over the past five years have ended an era defined by globalized supply chains and just-in-time deliveries. Rosenlicht cites last year's increases in copper and aluminum prices and sharp oil-market fluctuations amid conflict in the Middle East as evidence. Rosenlicht argues that disruptions and excessive dependence on particular suppliers have displaced a 40-year focus on supply efficiency and optimization.

Rosenlicht identifies an expanding global middle class, artificial intelligence, data centers, defense spending and electrification of transportation and industry as drivers of resource demand. The International Energy Agency (IEA) expects global data center electricity demand to more than double by 2030 compared with 2024 levels. The IEA expects that demand to roughly triple by 2035 compared with 2024 levels. Rosenlicht writes that demand growth follows several decades of declining investment in physical resource supply and coincides with precariously concentrated production. Rosenlicht describes many assets needed to meet demand as having high asset intensity and low obsolescence risk, or "HALO" characteristics. Rosenlicht argues that transmission networks, pipelines and rail systems can operate for decades, providing durable cash flows and long-term strategic value.

Rosenlicht argues that the energy system requires additional traditional and alternative energy supplies, rather than a simple replacement of oil and gas with renewable energy. Rosenlicht argues that expanding both categories is necessary to meet demand growth cost-efficiently. Rosenlicht projects that traditional energy consumption, excluding coal, will rise 23% over the next two decades. Alternative energy's market share is projected to double over the same period. Rosenlicht argues that investment strategies must adapt because the next decade's energy value chain will differ substantially from the last decade's.

Rosenlicht writes that differences in returns across energy value chains are wide and growing. Rosenlicht notes that integrated oil companies, liquefied natural gas exporters, nuclear developers, battery storage innovators and midstream operators face different supply-demand dynamics, regulations and geopolitical exposures. Rosenlicht argues that passive approaches treating energy as a single uniform sector risk missing opportunities and failing to adapt. Rosenlicht expects both traditional and alternative energy to produce investment winners and losers.

Rosenlicht argues that deploying renewable energy and other technologies will require substantial investment in grids, transmission lines and storage. The IEA's World Energy Investment 2026 report expects global clean energy investment to reach $2.2 trillion in 2026. The IEA report expects investment in advanced economies and China to rise 7% year-on-year. Rosenlicht writes that nuclear and other baseload electricity sources are experiencing renewed growth because rising demand and intermittent renewable generation increase the need for dependable, around-the-clock power. Rosenlicht identifies power grids, energy storage and gas pipelines as particularly compelling opportunities because energy distribution needs greater resilience.

Rosenlicht argues that investment managers developing products aligned with future energy needs, infrastructure modernization and resource scarcity may be best positioned to capture long-term shifts and avoid risks. Rosenlicht favors combining traditional and alternative energy investments because no single fuel can meet global needs alone. Rosenlicht argues that this approach allows investors to adjust allocations across all parts of the future energy economy. Rosenlicht argues that real assets offer diversification, resilience against inflation and exposure to long-term trends. However, Rosenlicht cautions that those trends will not benefit every investment and argues that active management is especially important.