These changes may not directly increase the commodity prices, but innovations in blockchain will offer more transparency and liquidity to commodity markets.
The industry is already investing to make this a reality. There are over 40 global startups and consortia in blockchain for energy and utilities, all trying to realize the benefits of blockchain.
Commodity/Energy Trading product evolution
The early 90s was the dawn of Commodity/Energy Trading and Risk Management (C/ETRM) software solutions. Small software companies started providing client/server platforms commercially for trade capture, position management, risk reporting, scheduling and accounting. As markets evolved, more sophisticated risk metrics (VaR, MC VaR, etc.) and credit risks, in addition to managing the particular physical characteristics of commodities from source through transport and storage till the final destination, became very important. C/ETRM products have also penetrated further into the supply chain, making process optimization, handling bulk orders, shipping and vessel management, core functionalities of the platform. Technology advancements have impacted the C/ETRM product evolution as well, moving from 2-tier architecture to newer, more flexible architecture. Greater modularization, allowing clients to choose what they need, improved analytics and data visualization, mobile and web enabled systems, are some of the advances made over the years. Big data and cloud ready ETRM products will most likely be taking the lion’s share of the mid-tier C/ETRM market in the near term, as more mid-tier companies move away from excel spreadsheets in the face of increased regulations. What comes next? It will start with blockchain enabled ETRM systems which are Cloud and Big Data ready, able to run analytics and provide crisp and insightful user experiences.
Where are we now?
There is significant experimentation across several industries, and a general acceptance of decentralization and distributed control which is central to blockchain. However, disruption usually comes from small risk-taking ventures rather than established risk averse organizations. Energy, Oil and Gas are mission critical and their evolution is also governed by legislation and regulation, in addition to international agreements. Non-disruptive, evolutionary transformations, and transformations due to external factors, will thus be the norm, potentially leading to disruptive use cases in the future.