Volatility has become a given in the lives of executives — a baseline condition reshaping risk across strategy, operations, and finance. Since 2020, commodity markets have been roiled by successive global shocks — the COVID-19 pandemic, Russia’s invasion of Ukraine, the imposition of extensive tariffs, and the unanticipated use of military force — as well as extreme weather, chokepoints, and swings in policy and economics. This makes volatility a structural, not cyclical influence.
In energy, the turmoil has affected most products, including liquefied natural gas (LNG), natural gas, coal, petrochemicals, and, of course, crude oil. Over the last five years, supply chains for these products — as well as countless other commodities — have faced frequent and significant disruptions, less predictable lead times, rising transit costs, and uneven reliability. As a result, the markets are often facing higher risk premiums, while uncertainty about interest rates is increasing thresholds for minimum returns on investment, raising hurdle rates for projects. Timeframes for the availability of funding are shrinking, with liquidity risks becoming more acute when hedging across regional markets.
While much of the attention is often focused on the price and availability of crude oil, a multiyear comparison of various energy commodities shows that the oversupply of crude has kept prices in check over time — despite sharp intraday price jumps that have accompanied geopolitical shocks of recent years. That’s not to say that crude has not felt the effects of volatility: The Brent crude price has seen an approximately 25% increase in the standard deviation of price returns when comparing 2015–2019 to 2020–2025. But if 2020’s COVID impact is removed from the calculations, Brent’s volatility over the last four years has actually declined, highlighting the substantial offset to disruptions provided by the oversupply.
Liquefied natural gas’s growing role in energy and volatility
In contrast, regionally concentrated commodities such as natural gas, LNG, and coal have seen more pronounced long-term volatility as pressures such as power demand, weather, conflicts, and policymaking interact in increasingly less predictable ways.
LNG now represents as much as one-fifth of global gas consumption, making regional shocks much more contagious. Because of the conflict in the Middle East, Qatar shut down its LNG production, which represents 20% of global supply, causing several energy giants to declare force majeure and pushing the price up dramatically.
The ability, or inability, to move a commodity can also add to its volatility. Despite images of burning oil tankers in the Strait of Hormuz, crude oil as a liquid is easier to move than gas, and as a result, its price tends to be less volatile over the long run. When the market is stressed, risk with energy commodities goes beyond price to whether sizable quantities can be moved and margins funded.
Commodity volatility is now the province of CFOs and COOs
Volatility is no longer a problem a company can hedge its way past or leave to trading desks. Under stress, liquidity dries up, basis risk bites, and margin calls spike just when a company needs the most protection.
Because it has become so much a part of the industrial fabric, volatility affects earnings, sometimes causing unexpected swings. It can also generate spikes in working capital and cause contract disputes. Because of volatility’s inextricable role in both the financial health and operational stability of companies, oversight now has to fall to chief financial officers and chief operations officers.
