Useful resource nationalism on the rise amid geopolitical tensions

Hey from Houston.

The information from Texas: ExxonMobil is doubling down on oil — regardless of issues that the market faces a looming oversupply disaster.

The US supermajor mentioned yesterday that it could crank up output by virtually a fifth by the top of the last decade, dialling up spending plans at the same time as a few of its friends maintain again amid rising fears of a provide glut.

The 5.4mn barrels of oil equal the corporate plans to pump day by day by the top of the last decade is greater than that of most Opec nations and would flip the west’s greatest producer into a world oil and fuel behemoth.

Exxon’s argument is that it could possibly produce oil far more cheaply than its rivals, making it finest positioned to provide what it predicts might be a permanent world thirst for fossil fuels — even when costs slide.

Elsewhere, the Biden administration yesterday hit China with a volley of recent tariffs on crucial mineral imports, a parting present by the president to Beijing as he appears to be like to shore up the nascent US cleantech manufacturing house earlier than leaving workplace. My colleague Aime Williams had the inside track.

That can also be the subject of right this moment’s e-newsletter. With useful resource nationalism on the march over the metals and minerals wanted to energy the economies of the long run, our commodities correspondent Camilla Hodgson digs into a brand new report on what this implies for an already-tense geopolitical scenario.

The decision? We’ve entered a brand new period of protectionism. Learn on for extra.

As ever, thanks for studying. E mail me at [email protected] — Myles

Western democracies drive a world rise in useful resource nationalism

Companies worldwide face elevated threat from a world rise in protectionism as nations scramble to safe entry to the minerals crucial to battery manufacturing and the power transition, in accordance with new analysis. 

Rising geopolitical tensions have fuelled an increase in state intervention and protectionism “not seen since the first half of the 20th century in western democracies”, world threat intelligence firm Verisk Maplecroft mentioned on Thursday. 

The change has been significantly acute in Europe and North America, with governments in each areas searching for to safe their entry to crucial minerals akin to lithium and copper — the availability chains for that are dominated by China — the researchers mentioned.

Elevated tensions within the sector have worsened in latest weeks with crucial minerals turning into an ever extra carefully watched geopolitical soccer. This month, China banned shipments to the US of a number of essential minerals and metals in retaliation for brand spanking new export controls imposed by the Biden administration designed to focus on Beijing’s improvement of synthetic intelligence. Earlier this yr, a coalition of western nations together with the US and UK introduced financing plans for minerals tasks in an effort to diversify away from China.

“The fracturing geopolitical landscape and the fallout from major shocks like the pandemic and Russia’s invasion of Ukraine have spurred an acceleration of policies aimed at acquiring the minerals needed to power the tech and defence industries, as well as the green transition to bolster energy security,” mentioned Jimena Blanco, chief analyst at Verisk Maplecroft. 

“State focus on supply chain security has opened the door for companies to take advantage of attractive incentive schemes, but geopolitical divergence could increasingly limit opportunities to allied or friendly jurisdictions,” she mentioned. 

In accordance with the researchers’ newest useful resource nationalism index — a quarterly evaluation that measures authorities management of financial exercise within the mining and power sectors — 72 nations out of the 198 assessed had seen a “significant increase” in interventionist and protectionist insurance policies over the previous 5 years.

Venezuela, Russia and Mexico had been judged to be the three nations the place companies confronted the best dangers of state intervention and expropriation within the sectors.

However the analysts mentioned that the danger scores for Germany, Spain, the UK and Poland had all worsened considerably since 2019, with Germany registering the most important drop of any nation throughout the interval. It has come as a consequence of protectionist strikes by Berlin such because the seizure of Russian power property following the nation’s invasion of Ukraine, and the providing of subsidies to spice up home mineral processing and manufacturing, they mentioned.

Extra broadly, the analysts identified that European and North American governments had taken steps to shore up their home mining and power industries and limit overseas funding from rivals with insurance policies together with US President Joe Biden’s Chips and Science Act. 

Forty-one nations that had been liable for 41 per cent of worldwide mineral output had been now categorized as being both “high” or “very high” threat for protectionist insurance policies, the researchers mentioned. That was a rise from 30 nations 5 years in the past.

“The most likely scenario is that western nations will increasingly use a mix of trade and investment policies, along with stricter sustainability standards, to restrict trade with rivals and push for localised supply chains,” mentioned Blanco.

Heightened dangers throughout a number of jurisdictions exacerbated the general challenges confronted by firms and buyers, given the advanced and cross-border nature of many crucial mineral provide chains, the group mentioned. For instance, a mineral could also be mined in a single nation however processed in one other and offered to a producer working in a 3rd.

The evaluation thought of nations’ protectionist and interventionist insurance policies, state participation in useful resource extraction and situations of direct and oblique expropriation, akin to asset nationalisation or regulatory adjustments that make doing enterprise within the sectors much less worthwhile. (Camilla Hodgson)

Energy Factors

Vitality Supply is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with assist from the FT’s world staff of reporters. Attain us at [email protected] and observe us on X at @FTEnergy. Compensate for previous editions of the e-newsletter right here.