When Russia invaded Ukraine early last year, the subsequent supply-chain chaos and Western sanctions caused a spike in oil prices that consumers worldwide felt almost immediately. In the U.S., the rising cost of crude pushed the average price of a gallon of gasoline from $3.40 in January to a record high of just over $5 by June. But since then—amid a weaker-than-expected post-COVID recovery in China, which has impacted crude demand—oil and gasoline prices have fallen back toward prewar prices. And with governments and businesses globally continuing to move away from their reliance on fossil fuels, there’s a new, lesser-known commodity that may be set to soar instead of black gold.

“For us here at Citi, copper is the energy transition bull trade. The world is cyclically weak right now, and that means the trade is on pause. But copper’s eventual bull run is likely to make oil’s famous 2008 rally look like child’s play,” Max Layton, Citi’s managing director for commodities research, said in an Aug. 23 video presentation for clients.

Layton is referencing the period when oil prices spiked before the onset of the Global Financial Crisis, rising from $50 per barrel in mid-2006 to $140 per barrel by late 2007 as strong demand from emerging markets clashed with stagnant global crude production. The veteran commodities analyst believes that copper prices could see a similar price spike over the next three years because the metal has become a favorite among commodity traders looking for exposure to the energy transition theme.

Copper’s critical role in electric vehicle batteries and other green energy technologies has led some to call it “the new oil.” The metal is used in solar panels, wind turbines, electrical cables, and even your iPhone. In fact, copper is so widely used in construction, manufacturing, and electronics production that it’s often seen as a proxy for global economic activity and a business cycle indicator, earning it the nickname “Dr. Copper.”

Lately, with the global economy struggling to regain its stride after COVID, the doctor has been sounding the alarm (copper prices are falling), but if you ask Citi, it’s just a minor setback for the energy transition king.

Copper prices have tumbled in 2023 amid weaker than forecast demand for the critical metal owing to slowing global economic growth. The London Metal Exchange’s cash copper price is now down 11% from its mid-January peak of over $9,400 per metric ton to just $8,359. But Citi’s Layton sees the pullback as an opportunity.

Because copper’s price tends to rise and fall in unison with global economic activity, many commodities traders have been forced to wait on the sidelines for global economic growth to improve before they can buy copper, creating a “massive queue” to buy the metal, according to Citi.

Layton said it makes sense for investors to be “cautious” about jumping into copper during the second half of 2023.

The country’s role as the world’s factory and continuous push to develop infrastructure and housing projects has given it an outsize position in the copper market over the past four decades. Even amid an ongoing crisis in the country’s property sector, China remained the biggest consumer of copper globally in 2022, using 55% of the world’s supply. But during the first six months of 2023, with its property market and manufacturing industry ailing, China imported just 1.65 million metric tons of refined copper, 12% less than it did a year ago.

The good news is Layton doesn’t expect the trend to last. He recommended investors slowly begin buying copper over the next 12 months, arguing that China’s eventual economic recovery and the energy transition will lead prices to surge to $15,000 per metric ton over the next three years. “Expected returns are a massive 50% to 100% by 2025,” he said of this “bull case” scenario.

However, Citi also outlined a bearish scenario where copper prices could fall 10% to $7,500 by 2025 in a July note. In this scenario, China’s economic recovery would be slower and less robust than expected, and rising interest rates in the U.S. and Europe would have a “larger than anticipated impact” on global growth, leading to weaker copper demand.

Still, the board of Polish mining giant KGHM Polska Miedź, the eighth largest copper producer globally, backed up Citi’s bull case outlook earlier this month in its second quarter earnings report.

But in the long run, as China’s economy recovers, the rise of electric personal vehicles—from cars to e-bikes—and the energy transition will keep demand for copper elevated globally, according to KGHM. And rising copper demand, coupled with limited supply owing to substantial constraints on new mining projects worldwide, including increased taxes and environmental regulations, should keep prices elevated for years to come.

“The aforementioned restrictions in supply, together with the strong trend towards electro-mobility and the green revolution spurring the pace of growth in demand for copper, will support copper prices in the long term,” KGHM’s board wrote.