How the Natural Resources Business Is Turning into a Technology Industry

Historically, the resources sector followed a dig-and-deliver model, where success was mainly about the size and quality of assets. For example, the oil industry depended on having the most plentiful reserves. Demand for resources grew in line with the economy and it paid to have the best and most expandable asset. But that’s no longer the case. How producers manage the resources they have is far more important than how much they have. Consider how the dynamics of demand are changing. The adoption of robotics, Internet of Things technology, and data analytics — along with macroeconomic trends and changing consumer behavior — are fundamentally transforming the way resources are consumed. Technology is enabling people to use energy more efficiently in their homes, offices, and factories. At the same time, technological innovation in transportation, the largest single user of oil, is helping to lower consumption of energy as engines become more fuel-efficient and the use of autonomous and electric vehicles grows. As a result, demand for resources is flattening out. At the McKinsey Global Institute, we modeled these trends and found that peak demand for major commodities like oil, thermal coal, and iron ore is in sight and may occur as soon as 2020 for coal and 2025 for oil.