I have invested a lot of time and energy this year in my energy writing, radio and podcasting activities trying to get to the bottom of the actual realities that exist in the global markets for critical rare earth minerals. The reason why is simple: Starting the day after Election Day 2020, the global media and climate alarm industry started pounding us every hour of every day with messaging supporting this “Energy Transition” narrative, and I needed to know more about the details behind that that exist in the real world.
The simple fact, as detailed by the IEA, the EIA and other global bodies, is that, if this Energy Transition we’re all being conditioned to accept as inevitable is to become a reality, the industries producing minerals like lithium, cobalt, tungsten, antimony, nickel and others are going to need to grow exponentially. Renewables and electric vehicles are at their base manufacturing industries and, as in any manufacturing industry, if you don’t have adequate supplies of the raw materials you won’t be able to make the end product. This really is not complicated.
So, to get to the bottom of what is really taking place on the ground, I set out to interview as many CEOs in these industries as I could, and to tell the stories, the challenges their companies face and the innovations they are pursuing. Fortunately, CEOs of these companies are far more willing to talk and tell their stories than their counterparts in oil and gas, so I’ve been able to talk on the record with more than half a dozen such executives this year.
What I’ve found is exactly what I expected to find: A collection of very smart, visionary men and women who are working on truly impressive innovations in this space that will no doubt result in higher, more efficient production of these minerals at some point in the future. And despite all that impressive vision and innovation, not a single one of these industry leaders could tell me how in the world their industry is going to be able to meet the demands that renewables and EVs will place on them if they are to truly meet the insanely unrealistic targets and goals being set by Joe Biden and governments around the world.
In its June report, IEA estimates that production of lithium – key to every lithium ion battery that powers ever EV on earth, and which is used in the manufacture of solar panels and a vast array of high-tech items – must grow by 900% by 2030, and by a whopping 4,000% by 2040. If that seems like a stretch to you, you are not alone.
Yesterday, the folks at Benchmark Minerals Intelligence tweeted out the following chart related to global lithium supply and demand projections:
In that chart, note that the lithium supply deficit in 2025 – just a little more than 3 years from now – will be bigger than the entire industry was in 2016. That’s mainly because demand in 2025 – the red line on the chart – is projected to be 500% higher than it was in 2016.
Note that the slope of that red demand line just keeps going up and up and up with no flattening in sight. Note also that the bars projecting anticipated supply of lithium measure not just new resources that are in development or probable to be developed, but also attempts to look at those that are merely “possible,”, i.e., potential resources whose reserves have yet to be proven, or those known to exist but that would require technological innovations in order to be economic to produce.
See the problem? Yeah, again, it’s really not complicated, is it?
Now, as with every other manufacturing operation, the extent to which renewables and EVs are truly going to be able to displace fossil fuels in power generation and the internal combustion engine in automobiles is going to be a matter of economics and competition.
In power generation, as I discussed yesterday, we are already seeing governments this year in places like California, Germany, the UK and much of the rest of Western Europe reactivating their dormant fleets of natural gas and coal power plants to provide electricity because the wind power they’ve stupidly relied upon is failing to meet its promises – promises that everyone knew were absurd at the time they were made, but which made for great virtue-signaling opportunities for cynical politicians.
The simple truth is that, given current technology, wind and solar power are not competitive in the marketplace when it comes to scalability to displace baseload generating capacity that can be reliably supplied by coal and natural gas. The laws of physics do not allow this even if the desires of politics really, really want it to be so.
It is very easy to project right now that, due to the realities of the global markets for lithium and other critical minerals, the world is about to witness a similar collision of virtue signaling vs. reality where EVs and the lithium-ion batteries that power them are concerned.
Here’s another very interesting chart published by Benchmark Minerals:
The cost of cathodes – a key element of every lithium-ion battery that relies on lithium, nickel and copper – is up more than 40% in 2021 alone. Obviously, that means the cost of the batteries themselves will rise, which in turn means that the price for those sleek Teslas and those cool Ford F-150 EVs is also going to go up. They already have, in fact.
Now, EVs were already so uncompetitive on price before these cost increases that they’ve had to rely on massive subsidies from national and state governments in order to sell at all. As that gap between the price for EV and the price for the same gas-powered model continues to rise, sales are going to take a beating.
And that gap in price will continue to rise. There is simply no question about it – the laws of economic reality make that inevitable, as demand for these minerals continues to outstrip supply at higher and higher volumes as the years roll along.
This is our reality, as opposed to the world of unicorns and sugarplum fairies being sold to virtue-signaling-hungry politicians by the climate alarm industry every hour of every day.
Now, this does not mean that our energy mix is going to stop getting cleaner and cleaner as time goes on. These improvements to our environment will continue to come to reality for the simple reason that ordinary consumers demand it.
Here are some things that it does mean, though:
– The oil and gas industry will continue to grow for decades to come in order to meet demands for its own products that play such vital roles in our daily lives;
– The coal industry will likely see a bit of a renaissance in the coming years, in conjunction with advances in carbon capture and usage technology;
– Carbon capture, usage and storage projects like the huge one being led by ExxonMobil in the greater Houston area will be an enormous global growth industry;
– Although EV distribution will grow as a preferred vehicle among society’s elite, who can afford the ever-higher prices, gasoline-powered cars will continue to dominate the market for the foreseeable future;
– Electricity provided by natural gas will also grow as politicians figure out that virtue-signaling about wind is less important to their re-election chances than ensuring that their people actually have reliable electricity in their homes at reasonable rates and aren’t experiencing frequent blackouts;
– And, despite their lack of scalability and reliability, wind and solar will also continue to grow, because demand for energy is going to continue to rapidly rise, and the world will need to take advantage of all sources available to generate it.
That’s the reality of our energy future. There are no unicorns, no sugarplum fairies, just the laws of physics and supply and demand.