Friday, October 7, 2022

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The end of the oil age

At 05:42 on the morning of March 8, panic broke out on the London Metal Exchange as nickel prices began to rise rapidly. Within 18 minutes, the price of a ton of nickel exceeded $100,000 with an unprecedented rise, and metal trading temporarily halted. The metal’s value had also seen a 250 percent increase in the 24 hours before this record increase. This wave in energy went down in history as the first major metal crisis to shake up the global market since Russia entered Ukraine. This price increase, associated with Western sanctions on Russia and speculation about new energy deals, showed that metals such as nickel play a major role in the economy’s transition to clean energy, while the world wants to move away from fossil fuels.
On the other hand, Russia, the world’s largest exporter of natural gas and oil, has shown that Europe and many countries can use their dependence on Russian gas as a weapon of war in retaliation for the sanctions imposed on it by the USA and its allies to end the occupation of Ukraine. US President Joe Biden, in his statement on March 31, drew attention to the importance for national security of building a “future with American-made clean energy”. “We need to end our dependence on China and other countries,” said Biden, and introduced the Defense Production Act to support local manufacturers who can manufacture and process minerals used to manufacture electric batteries and conserve renewable energies. Lithium, nickel, graphite, manganese and cobalt are among the minerals highlighted by the White House.
But there is more to these minerals. As the transition to an electricity-intensive economy continues in energy, each country competing for market share has different types of minerals on target, depending on its needs. According to experts, the competitiveness of countries stuck in oil, natural gas and coal exports may decrease. Let’s look at Russia, whose economic power relies heavily on fossil fuels. The country is the second largest natural gas producer and third largest oil producer in the world.
However, considering the role that mines play in the future of the economy, Russia is not without its advantages. The country is also the second largest cobalt exporter in the world. It ranks second in platinum exports and third in nickel exports. According to experts, although Russia has a strong hand in this new order, there are other countries where these minerals are extracted much more intensively. Most of the world’s cobalt comes from the Democratic Republic of Congo, nickel from Indonesia, lithium from Australia, copper from Chile, and rare earths from China. There are 17 minerals that experts say are critical to the global energy transition. According to the International Energy Agency (IEA), these minerals are; lithium, nickel, cobalt, copper, graphite and rare earth elements.
According to the news of Cecilia Barría from the BBC, energy expert Tae-Yoon Kim, who studies the importance of minerals in the transition to clean energy, says that the demand for these minerals will increase rapidly before 2040. Tae-Yoon Kim categorizes the countries that are expected to benefit the most from the energy transition, according to two categories: leaders in mineral extraction and leaders in mineral processing. Although minerals are mined in many countries, China is still a leader in processing. “It is difficult to identify the countries that will benefit most from the energy transition because it depends on where they are located in the manufacturing chain,” Kim told the BBC. What is clear is that we are now at a critical point. Petroleum products were the power that shaped 20th century history, but minerals are expected to dominate the next century. In Kim’s words, these resources are “minerals of the future”.
In the midst of the Russia-Ukraine war, it is not surprising that the USA and Europe are trying to get rid of their dependence on China and Russia and are looking for minerals in the next 20 years. The European countries, which import nearly 40 percent of their natural gas from Russia and find themselves in a dilemma, are the ones that have the most headaches due to the developments. Indeed, speaking to the BBC last month, Ángel Saz-Carranza, director of the Esade Center for Global Economy and Geopolitics in Spain, criticized Europe’s stance, saying that “Europe finances Putin’s whims”.
Minerals play an important role not only in electric batteries, but also in the storage of different types of energy. Both private companies and governments will compete to own these minerals for economic prosperity as energy transforms. However, according to some experts, the supply-demand balance is important. “If supply can’t keep up with demand, prices will jump,” says Lukas Boer of the Institute for Economic Research in Germany. Moreover, it takes an average of 16 years for the mining projects, where these metals are extracted, to become operational. Boer also says they expect the metal supply shortage to increase over the next decade. In their study published last year, Boer and his colleagues pointed out that in addition to rare earth elements, countries will set their sights on four metals: Nickel,
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