Today, trade in energy commodities mostly takes place in the absence of international rules. There is no universal international energy organisation. The only form of energy which is subjected to the oversight of an international organisation is nuclear, for which the International Atomic Energy Agency has a specific mandate.

Energy commodities have traditionally played an important role in international trade, because energy resources are unevenly distributed among countries. The incidence of the three major fossil fuels (coal, oil and gas) over total trade is however far from stable: in 2012 the three together accounted for close to 11% of total global exports (oil alone accounted for 8%, gas for 2.2%); by 2016 their share of global exports had collapsed to 5.2%, primarily because of the dramatic decline in prices which started in the summer of 2014 and hit bottom at the beginning of 2016. Prices exert therefore the dominant influence on the value of trade in energy products, and significantly influence the aggregate value of global exports.

The importance of these three commodities in international trade is not proportional to their respective share as global primary sources of energy. This is due to the fact that coal and gas travel less easily than oil: in practice, while most produced oil is traded internationally, the vast majority of coal and gas is consumed closer to where it is produced. The ease of transportation and trade of oil as a source of energy is unique in history and is one reason why oil became the most important source of energy towards the middle of the past century – a position which it maintains today, although relatively speaking its share has been declining ever since 1970. Previous to the major expansion of reliance on oil, the availability of nearby sources of energy was a major determinant of industrialisation opportunities. It is to a significant degree thanks to oil that industry has been located much more freely, with primary attention being paid to markets or convenient labour supply conditions, rather than energy supply conditions.

Considerable progress has been made in the last 50 years in the transportation of natural gas, first by pipeline and then in liquefied form (liquefied natural gas – LNG). Most future energy scenarios envisage a growing role for natural gas and a major expansion of international long-distance gas trade, thanks to the reduction in the cost of liquefaction and LNG transportation. While today two-thirds of globally traded gas are transported via pipeline, it is expected that LNG will become as important or even surpass pipeline gas within the next two or three decades. It is therefore possible that gas trade will become more globalised and similar to oil. In this case, the growing role of gas will support continuing globalisation of trade in fossil fuels.

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The pattern of trade in energy commodities will also be influenced by global efforts to contain global warming. Renewable energy sources are location-specific and cannot be traded internationally: the electricity they produce can and will be traded internationally, but the extent to which this will happen remains highly uncertain. International trade in electricity has been on the rise in some parts of the world, notably within the European Union, where a determined effort has been made over the past 20 years to achieve the unification of the power market throughout the continent. Notwithstanding this effort, the availability of electricity (and gas) interconnections remains insufficient, and trade quite limited.Renewable energy sources are location-specific and cannot be traded internationally  Elsewhere in the world very little international trade in electricity takes place – limitations exist even for domestic trade, including in the United States. Hence it is likely that, to the extent that more energy will be consumed in the form of electricity, and more electricity will originate from renewable sources, the importance of international trade in energy will decline. But this conclusion might be reversed if a major increase in investment in long-distance high-voltage lines can be achieved: the opportunity exists (large hydroelectricity projects in Africa, Asia and Latin America; solar energy for export from desert countries) but commercial, regulatory and security challenges are very significant.

That said, fossil fuels, which today still account for 85% of global energy demand, are not going to disappear overnight. The demand for oil is still growing (the International Energy Agency expects it to grow by 1.3 million barrels per day in 2018, with total global consumption reaching 99.1 million barrels per day) and scenarios envisaging a peak in oil demand in the next twenty years rely on assumptions about policies that are not based on current realities or trends. If much more aggressive policies for decarbonisation are not introduced by the middle of the next decade it is highly likely that hydrocarbon prices will climb again towards the end of the 2020s, if not earlier. This would significantly impact both the aggregate value of total global exports and the share which is accounted for by fossil fuels.

Finally, it is also likely that more of the crude oil produced in the major oil-exporting countries will be transformed locally rather than exported as crude. Large investment in new refineries and, more importantly, petrochemical plants is already shifting the composition of exports towards higher value-added products. If the demand for oil as fuel may decline, demand for increasingly sophisticated and high-technology petrochemical products is expected to expand rapidly for the foreseeable future.

The future of international trade in energy commodities thus very much depends on policies that may be adopted to avoid global warming The future of international trade in energy commodities thus very much depends on policies that may be adopted to avoid global warming. If sufficient international consensus is found to pursue policies that are global and incisive, we may witness a decline in trading of fossil fuels and possibly an increase in internationally traded electricity. The latter is likely to require the establishment of appropriate international regulation, which would not be easy to achieve as energy remains an area of intense national concern.