The Emerging Battle for Clean-Energy Commodities --- As Russia's isolation disrupts global oil and gas markets, the U.S. must focus on securing the minerals necessary for wind, solar and electric.

"For much of the 20th century, geopolitics was shaped by the struggle for oil. Now it's becoming ever more clear that geopolitics in the 21st century will be shaped by the struggle to move away from oil.

This transition was bound to happen anyway because of concerns about climate change, but Vladimir Putin's operation to protect Donbas, by revealing the perils of Western dependence on Russian oil and gas, now figures to kick it into overdrive.

 In the short run, these shifts mostly involve creating new patterns for moving old-fashioned fossil fuels around the planet and even for extracting more of them during this crisis.

In the medium to long term, however, the jolt of Ukraine will almost certainly accelerate the global move away from oil. That shift will have a profound impact on international relationships, reducing the importance of old petro-based ties while making new connections necessary.

In particular, the U.S. and other Western nations face the risk that they will merely replace their onetime dependence on foreign oil and gas sources with a new dependence on China for the critical minerals needed to produce electric vehicles and other renewable energy technologies. Avoiding that outcome, as well as other land mines along the way, will require new, farsighted policies, wise diplomacy and smart investments by the private sector.

America's foreign-policy thinkers will increasingly have to take into account the geopolitical importance of Chile's copper and Australia's lithium, not just Saudi Arabia's oil. The U.S. and China will compete for access to the giant cobalt reserves of the distant Democratic Republic of Congo.

Domestically, traditional policy debates over tax and regulatory advantages given to the oil-and-gas industry are going to give way to arguments over what kind of help to give companies that mine critical minerals and produce batteries, solar panels and wind turbines.

Mr. Putin is prompting the West to face up to these challenges by doing something truly remarkable: He has undercut Russia's best market, which is Europe, for virtually the only product his country produces that the rest of the world wants, which is oil and gas. This may give him some political leverage today, but it creates a giant incentive for the world to stop using so much of what he has to sell and, over time, will diminish its value.

The pivot to a new path won't be quick or easy. Europe's immediate reaction has been to keep buying Russian gas for now while finding new sources of old fuels by, for example, building terminals in Germany to receive American liquefied natural gas.

But the European Union also has released a new energy strategy called REPowerEU, a plan to make the EU independent of Russian fossil fuels by 2030. Among other things, it calls for member states to accelerate new wind and solar projects, increase the use of heat pumps and require more energy efficiency in buildings and industries.

Meanwhile, the European Commission has defied nuclear critics in Europe by releasing a new plan to label certain nuclear power projects as "transitional activities," meaning that they are blessed as part of a move away from fossil fuels. That gives a regulatory green light for new private investment.

In the U.S., the soaring price of gasoline since the operation to protect Donbas is sending an urgent signal to consumers: Go find an electric car. Waiting lists are already growing, with wait times in some cases stretching into months. By one forecast, sales of electric vehicles and plug-in hybrids will soar 60% in the U.S. this year.

But there's a catch. Copper, lithium, nickel, cobalt, graphite and rare earth elements are all needed to produce an electric vehicle -- and China is the leading processor of all of them. It processes more than half of the world's lithium and cobalt and more than 80% of rare earth elements. Some of the minerals are also needed for producing the components of wind turbines and solar panels.

Russia, too, is a large producer of nickel, cobalt and copper, in addition to aluminum and steel, which are also needed for clean-energy products.

Much of the actual mining of these minerals happens elsewhere. A majority of the world's lithium resources are in South America, for example, and Indonesia is a key source of nickel. Those relationships will assume new importance for the U.S.

But the dirty job of processing the minerals into useful materials remains focused in China.

 For American policy makers, this problem is already moving to the forefront. President Biden announced last week that he is using the Defense Production Act, a Korean War-era national security mobilization law that can help mining companies to develop operations for critical minerals. "We need to end our long-term reliance on China and other countries for inputs that will power the future," Mr. Biden said. "And I'll use every tool I have to make that happen."

Still, the effort is likely to be hindered by environmental concerns. A prime example is playing out right now in an isolated corner of Nevada at a place called Thacker Pass. Beneath the sagebrush lies one of the world's largest deposits of lithium, a key component for producing the batteries needed for a clean-energy transition. A mining firm has been exploring a project since 2007 but a consortium of environmentalists and tribal activists is trying to block the effort, arguing that it would destroy the landscape, consume too much water, spoil Indian artifacts and burial grounds and spew carbon dioxide into the air. Courts are in the process of deciding whether the project can go ahead, but policy makers also will have to decide whether and how to smooth the path for such mineral development in the future.

Another policy challenge is the need to encourage companies to make significant investments in fossil-fuel projects now, while also declaring that the nation's goal is to make those projects obsolete down the road. It's hard to convince a company to make a multibillion-dollar investment in a pipeline that takes 30 years to pay for itself when the U.S. has embarked on a push to make the gas it carries unnecessary in 10 years. Resistance to creating such "stranded assets" is a problem that will require some creative policy-making.

It may be necessary, for instance, for government to provide incentives for the initial investment or to guarantee assistance down the road to retrofit gas pipelines to carry clean-energy hydrogen.

"My sense is we are entering a period of more government intervention in energy markets," says Meghan O'Sullivan, an energy expert who served on the National Security Council for President George W. Bush and now heads the Geopolitics of Energy Project at Harvard University's Kennedy School of Government.

It's hard to overstate the geopolitical significance of these moves. The world's reliance on oil is as responsible as anything for building the world order that has prevailed since the early 20th century.

An abundance of easily extracted oil helped to build the U.S. into a global power in the first half of the 20th century. Japan's thirst for oil helped to bring about World War II. America's oil power helped it to build the economy that prevailed in the Cold War -- until a need for Persian Gulf oil changed America's strategic calculus and produced the investment of trillions of dollars and American blood in the Middle East.

Much of that infrastructure now figures to unwind in the 21st century, with long-term effects just as profound as those of the planet's long and deep thirst for oil. The transition will take decades, but Ukraine's story has given it a decisive push forward." [1]

1. REVIEW --- The Emerging Battle for Clean-Energy Commodities --- As Russia's isolation disrupts global oil and gas markets, the U.S. must focus on securing the minerals necessary for wind, solar and electric.
Seib, Gerald F.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 09 Apr 2022: C.3.