Prices for oil and critical minerals soar as Russia continues invasion of Ukraine

Oil prices are now averaging $125 a barrel and some believe they will reach $200 per barrel. Current gasoline prices are above their 2008 record high, averaging $4.25 per gallon. A senior Russian minister has said Western countries could face oil prices of more than $300 per barrel and the possible closure of the main Russia-Germany gas pipeline if governments cut off energy supplies from Russia. Russia’s invasion of Ukraine is driving up the price of metals used in cars, from aluminum in bodywork to palladium in catalytic converters to high-grade nickel in electric vehicle batteries. The London Metal Exchange recently suspended nickel trading and canceled trades after prices doubled to more than $100,000 per metric ton. Russia provides about 13 percent of nickel and the Russian Nornickel is the world’s largest supplier of battery-grade nickel with 15 to 20% of the world’s supply. Aluminum and palladium, which Russia also supplies, both hit record highs this week. According to a recent forecast by IHS Markit Ltd., the average price of the lithium-ion battery, the most expensive component in electric vehicles, would increase 5 percent This year.

Source: Mining Technologies

Automakers see rising costs

Critical increases in metal prices will increase the cost of automobiles. The average transaction price for a new vehicle in the United States was $44,460 in February, up 18.5% from the same month in 2021. German automakers such as Volkswagen and BMW have already been hit by the Russian invasion, which has forced wire harness manufacturers from the west of Ukraine to stop production. Ukraine is a key supplier of wiring harnesses, which are a bundle of parts for up to 5 km (3.1 miles) of wires in an average car. Ukraine also supplies coal, iron ore and uranium and disruptions are likely. For example, Arcelor Mittal ceased operations in underground iron ore mines in Ukraine and slowed production at the Kryvyi Rih steelworks. This is in the context of recent closures of metal production facilities across Europe due to skyrocketing energy prices due to failures in their increasingly renewable energy generation system.

As stated above, Russia is a major producer and supplier of metals. For example, in 2020, Russia represented 44 percent German imports of nickel, 41% of its titanium, a third of its iron and 18% of its palladium. Russia is the world’s fifth largest producer of iron ore with the production of 108 million metric tons last year and the third producer aluminium, the most energy-intensive metal to produce, representing 6 percent of world production. Russia is the world’s largest supplier of palladium, accounting for approximately 40 percent of the world market. Palladium prices have been rising for about six years. For catalytic converters, which are mandatory on cars, there is no other option than palladium and platinum.

Position of the Biden administration

The Biden administration sees the war in Ukraine as a primary reason to launch a national battery supply chain. Several Biden officials noted that the Russian invasion has underscored the need for US-based battery production, which is under pressure. Department of Energy Plan released at the end of February. This plan envisioned how the United States could begin to build domestic capabilities in everything from mining and mineral processing to battery assembly and recycling of used components. The Department of Energy‘s framework contained dozens of recommendations for Congress and local policymakers, including a call to create new tax incentives for home clean energy manufacturing. According to Energy Secretary Jennifer Granholm, the Russian invasion had only “deepen” the urgency of a clean energy transition powered by US-made batteries, which are a key component of electric vehicles and networked storage. “The only way to get closer to true energy independence, national security, is to develop the technology at home with a reliable supply chain,” she added.

It’s all very beautiful. But the fastest way to be energy independent is not in renewable energy and electric vehicles. It was in oil, natural gas, and coal that the United States was energy independent as recently as 2020. Today, renewable energy, including hydroelectricity, provides only 12 percent of our energy needs, thanks to decades of federal subsidies and state mandates. According to the latest report from the Energy Information Administration Annual Energy Outlook, in 2050, these same renewable energies will provide only about 20% of our energy needs. Forecasts predict that the United States will obtain 74% of its energy needs from fossil fuels in 2050.

As shown in the graph below, China controls the production of rare earth minerals and the processing of the most critical minerals. China has been working to achieve this dominance for decades. It would take the United States just as long to achieve this goal if the Biden administration were serious about doing so. But again, actions speak louder than words. Just 6 weeks ago, in late January, President Biden’s Department of the Interior revoked existing federal leases for Twin Metals Minnesota to mine copper, nickel, cobalt and platinum group elements in the forest. superior national. They are minerals necessary for the renewable energy and “electrification of everything” that the Biden administration envisions in its economic and energy transformation of the United States.

Additionally, two new copper mines in Arizona are struggling to get approvals. The Resolution copper mine at Oak Flat, Arizona, which can reach approximately 25% of copper demand in the United States, is currently undergoing a federal environmental review. Last year, the House Natural Resources Committee voted to include language in the reconciliation package to block construction of the resolution copper mine. The Rosemont copper mine in Arizona’s northern Santa Rita Mountains recently suffered a setback when federal regulators rejected its mining company’s request to reduce critical habitat for jaguars deemed endangered on land that overlaps proposed mine footprint.

The PolyMet copper and nickel mine, located in Minnesota’s Mesabi Iron Range, is blocked by courts and regulatory action despite more than a decade of extensive public environmental reviews. The Thacker Pass lithium mine, located in Humboldt County, Nevada, about 25 miles from the Nevada–Oregon border, could produce a quarter of current global lithium demand. While the Bureau of Land Management granted the project its final permit in January 2021, development of the mine is still on hold as several permits are in dispute.

The Copper, Molybdenum and Gold Pebble Mine, 100 miles from Bristol BayAlaska had its permit application rejected in November 2020 by the United States Army Corps of Engineers. The Pebble mine also contains massive amounts of rare earths and strategic minerals, including palladium and rhenium. In January 2021, the Pebble Partnership asked the Army Corps of Engineers to rescind its denial of the mine project. Clean Water Act permits for dredging and filling. According to Northern Dynasty Minerals, the decision is under further review and is expected to take a year or more. The Environmental Protection Agency, however, indicated that, depending on the outcome of the courts, it would reopen a veto proposal of the Pebble mine, which, if completed, would effectively block its development on state lands. This process, initiated under the Obama administration, culminated in a proposal to veto the mine in 2015, even before Pebble had applied for a permit with the Army Corps of Engineers. The proposed Pebble Mine is adjacent to other potential mineral-rich deposits that could be made economic through the infrastructure that the Pebble Mine would deploy for development.

Conclusion

The Russian invasion of Ukraine is driving up the prices of oil and critical metals, which have become scarce, giving the energy transition that Western countries are pushing. The initial supply shortage began to drive up prices long before the war, which were exacerbated by the war. Energy and mineral insecurity were “pre-existing conditions” when Putin’s tanks entered Ukraine, and may have been a precipitating factor.

President Biden’s Department of Energy wants to facilitate a faster transition to develop an American supply chain for battery production, but China has spent decades becoming dominant in this area and the United States would need help. ‘at least the same schedule to develop it. China is not restricted by environmental activists whose activities have contributed to European dependency and clearly have the ear of the White House in the Biden administration. The quickest way to energy independence is to unburden our oil and gas industry to allow it to build America’s energy security so that we can once again become the world leader in these fuels. Otherwise, if nothing changes in the policies of the Biden administration, the United States will become dependent on China for 80% of the “green energy” supply chain…4 times its dependence on the Middle East in 2001.

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