Green Energy Shuffles Global Influence.

"From OPEC's oil embargo on the U.S. in the 1970s to sanctioning of Russia caused cutoff of natural gas to Western Europe last year, countries have weaponized their control of oil and gas to pursue strategic goals.

The transition to green energy has the potential to neuter the oil and gas weapon for good. Yet we might simply be swapping one form of commodity dependence and its geopolitical baggage for another.

Wind, sun and hydrogen are free. But the equipment that transforms them into energy, stores it in batteries and transmits it needs vast quantities of minerals whose supply is concentrated.

Congo has 43% of the world's cobalt deposits, Argentina 34% of lithium, Chile 30% of copper and Indonesia 19% of nickel, according to data from S&P Global. All exceed Saudi Arabia's 12% share of global oil production and Russia's 16% share of natural-gas output.

For all four minerals, the five largest countries have more than half of global deposits. With oil and gas, the top five control less than half, the S&P figures show.

Downstream production is even more concentrated: China refines 70% of the world's cobalt, 65% of lithium and 42% of copper, far exceeding the share of oil output by the Organization of the Petroleum Exporting Countries.

Western governments once welcomed China's willingness to do this dirty work. Not anymore. A new Cold War is emerging between China and Russia on one side and the U.S. and allies on the other, and both blocs are weaponizing that interdependence. When events in Ukraine started, the West kicked Russia out of the global banking system and cut off supplies of vital inputs and services. Sanctions on Russia slashed gas supplies to Western Europe. Meanwhile, the U.S. restricted China's access to key semiconductor technologies.

No one weaponizes interdependence more than China. It regularly bars imports and exports with countries that cross it politically, and discriminates against foreign companies. In July it said it would restrict exports of two minerals vital for semiconductors, missile systems and solar cells.

The U.S. is scrambling to limit its vulnerability. The Inflation Reduction Act showers subsidies on electric vehicles, batteries and renewable energy, provided the minerals involved come from the U.S. or countries with which it has a free-trade agreement and don't come from China.

But, as S&P Global points out, there are problems with this strategy. First, demand for these minerals is already skyrocketing, and the law will increase that demand by 12% to 15% by 2035. U.S. consumption of nickel, cobalt and lithium will grow 23-fold by 2035, it projects. Consumption of copper will double.

This, S&P concludes, will make the U.S. ever more reliant on imports that will be hard to source from free-trade partners, and without China. For example, in 2035, non-free-trade partners will account for 90% of global cobalt production, most of it in Congo, which exports 70% of its production to China.

These minerals aren't in short supply. The U.S. boasts copper deposits equivalent to 20 years' worth of its own demand, S&P notes. The problem is accessing it; the firm estimates it takes 15 years on average for a mine to go from discovery to production.

The U.S. is particularly slow: Permitting alone takes seven to 10 years, versus two to three in Australia and Canada. Refining economics are even more challenging, said Aurian de La Noue, consulting director at S&P Commodity Insights. A copper refinery or smelter hasn't been built in the U.S. since the 1970s, he said.

From the 1950s to the 1980s, Western oil companies saw their operations nationalized by host countries. Today, resource nationalism is again spreading. Indonesia is restricting exports of nickel ore, and Chile is partially nationalizing its lithium mines.

Nonetheless, the geopolitics of energy in the next era will be very different from the last: Energy minerals will never be weaponized as effectively as oil and gas were.

Oil was in some ways unique. Easier to transport and store than wood or coal and far more efficient, oil lent itself to international trade -- and efforts to control that trade. Its critical role in transportation, including for army trucks, tanks, aircraft and warships, made its availability a matter of national survival.

By contrast, energy minerals aren't fuel. Deprived of some critical mineral, "the cost of EVs would go up, it would be harder to do an offshore wind project, but nobody is going to be standing in line to fill up their car with copper," Daniel Yergin, an energy historian and vice chairman of S&P, said.

Export restrictions or attempts to form an OPEC-like cartel would in time elevate prices and spur the hunt for alternatives. A recently discovered lithium deposit in a volcanic crater along the Oregon-Nevada border could be the world's largest, according to the magazine Chemistry World. Permitting delays would shrink in an emergency. 

After sanctions on Russia cut gas shipments, Germany built a liquefied national gas terminal in less than a year.

Besides geographic diversification, renewable energy benefits from technological diversification. De La Noue notes that copper competes with aluminum in electrical wiring, while lithium, nickel and cobalt all compete with one another in battery chemistry. Innovators are working on sodium-ion and iron-air batteries that use no lithium.

Perhaps the greatest obstacle to the future weaponization of energy is that we are entering an era of unprecedented variety. The data site Our World in Data notes that until the 1900s, almost all energy came from coal and biomass, such as wood. Over the past century, those were joined by oil and gas. With the growth of nuclear, hydro, wind, solar and, in time, hydrogen and biofuels, the world's energy supply will be more diversified than at any time in history.

"Diversification is the central precept of energy security," Yergin said. In his book "The Prize: The Epic Quest for Oil, Money & Power," he quotes Winston Churchill on his pursuit of secure fuel supply for the Royal Navy in World War I: "Safety and certainty in oil lie in variety, and variety alone.""  [1]

It appears that Biden's attempt to cut off the US from China will only slow down the US transition to new energy sources, making the US a laggard in the new world. Let's hope that Trump understands this problem and will be able to change course timely.

1. U.S. News -- Capital Account: Green Energy Shuffles Global Influence. Ip, Greg. 
Wall Street Journal, Eastern edition; New York, N.Y.. 14 Sep 2023: A.2.