The Frenzied Global Race For White Oil

Not since the early days of the oil boom, has the world witnessed such a feverish pace of energy exploration.  From Argentina to Chile to Bolivia the hunt for lithium, dubbed "white oil", is fueling a surge in mining. Global demand for the silvery-white metal is expected to more than double by 2024.

Lithium is a key component in batteries that power electric vehicles (EV) designed to replace gasoline burning cars.  Lithium is a lightweight, alkali metal that stores energy efficiently and can be repeatedly recharged. A 1,200-pound battery in a Tesla Model S requires about 138-pounds of lithium.

Burgeoning global sales of electric cars, which increased 80% in 2021, are at the heart of the frenzied search for lithium reserves. By 2050, up to one billion electric vehicles are forecast on the roads worldwide, about 72 times more than the  EV's operating in 2020. 

Another contributor to the spiraling lithium demand is batteries for tablets, laptop computers and smart phones. Increasingly, lithium is also being deployed in electric grids to store energy from renewable sources, such as wind and solar.  Demand sent lithium prices skyrocketing 240% in 2021. 

In the global race to replace fossil fuels with with clean energy, the environmental impact of extracting lithium is surfacing as a major ecological issue. Most lithium is derived from traditional mine drilling or brine extraction, processes which scar the land or pollute water sources.

In Argentina and Chile massive amounts of water are used to loosen underground brine deposits, leading to contentious squabbles over the water supply. About 500,000 gallons of water are used per ton of lithium.  For some desolate areas, that could represent more than half of the available water supply.

Regions with rich lithium deposits are in poor, remote places, far removed from the nearest EV. The largest reserves of lithium--8.6 billion tons--are located in Chile, Australia and Argentina.  Nearly half of the world's known reserves reside in Chile.  These countries are also the top producers of the metal.

The United States has an estimated 630,000 tons of lithium reserves, the majority located in Thacker Pass in Nevada.  Area residents, Native American tribes and ranchers are opposing the building of a mine in the area.  To date, the opponents have stalled exploration and development.

Silver Peak Lithium Mine in Nevada represents the lone lithium operation in America.  It produces about 5,000 tons of lithium carbonate a year with capacity for 6,000 tons. That is less than 2% of the world's supply.  The operator extracts brine from an old lake bed that contains shallow ponds of lithium.

Estimates are the U.S. will need 500,000 metric tons per year of raw or unrefined lithium by 2034 just to power electric vehicles, according to California-based battery supplier OneCharge.  For comparisons sake, the entire global production of lithium in 2020 was 440,000 metric tons. 

China is the dominate player in lithium batteries.  Over the past decade, the government has spent $60 bullion to shore up its lithium industry. Additionally, China has the world's most robust lithium supply chain.

It is the largest importer of lithium-ion battery cells in the world and has the most ambitious electric car manufacturing schedule, planning to reach 52% of sales by 2040. China's lithium imports in 2019 were worth $46.9 billion,  China also exported 48% of the world's supply of lithium-ion cells and packs.

In recent years, China has been snapping up stakes in mining operations in South America and Australia.  China has invested $4.2 billion in lithium deals in South America during the last two years. The regime has also been tightening its grip on the supply of cobalt, a lithium-ion battery component. 

The threat is China will dominate the global supply of lithium just as OPEC once controlled the world's petroleum production, setting production limits and the price.  If China cuts off the U.S., American automobile and electronic industries will be left to scramble for lithium and lithium-ion batteries. 

Currently, the U.S. imports 90% of its lithium metal from two countries: Argentina and Chile.  Europe imports nearly every ounce of battery-grade lithium it uses,.  More than half (55%) originates in Australia.  Other principal suppliers include Chile (23%), China (10%) and Argentina (8%).

China is plotting to monopolize the supply and production of lithium batteries. The country already account for more than 60% of global lithium-ion battery production. In recognition of the threat, the Biden Administration has signaled it intends to provide $2.91 billion to boost U.S. battery production.

But public-private-regulatory partnerships are also needed to support lithium mining and production at home, to boost battery cell and pack manufacturing facilities and for recycling plants for battery disposal. Unless the U.S. acts soon, the nation will fall further behind China in this strategic area.