Useful resource nationalism on the rise amid geopolitical tensions

Hiya from Houston.

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

The US supermajor stated yesterday that it might crank up output by virtually a fifth by the top of the last decade, dialling up spending plans whilst 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 international locations and would flip the west’s greatest producer into a worldwide oil and fuel behemoth.

Exxon’s argument is that it could actually produce oil rather more cheaply than its rivals, making it greatest positioned to produce what it predicts might be an everlasting international thirst for fossil fuels — even when costs slide.

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

That can be the subject of immediately’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 state of affairs.

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

As ever, thanks for studying. E-mail me at myles.mccormick@ft.com — Myles

Western democracies drive a worldwide rise in useful resource nationalism

Companies worldwide face elevated threat from a worldwide rise in protectionism as international locations scramble to safe entry to the minerals crucial to battery manufacturing and the vitality transition, in response to 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”, international threat intelligence firm Verisk Maplecroft stated on Thursday. 

The change has been notably acute in Europe and North America, with governments in each areas looking for to safe their entry to crucial minerals resembling lithium and copper — the provision chains for that are dominated by China — the researchers stated.

Elevated tensions within the sector have worsened in latest weeks with crucial minerals turning into an ever extra intently 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 12 months, 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,” stated 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 stated. 

In keeping with the researchers’ newest useful resource nationalism index — a quarterly evaluation that measures authorities management of financial exercise within the mining and vitality sectors — 72 international locations 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 have been judged to be the three international locations the place companies confronted the best dangers of state intervention and expropriation within the sectors.

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

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

Forty-one international locations that have been chargeable for 41 per cent of worldwide mineral output have been now categorized as being both “high” or “very high” threat for protectionist insurance policies, the researchers stated. That was a rise from 30 international locations 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,” stated Blanco.

Heightened dangers throughout a number of jurisdictions exacerbated the general challenges confronted by corporations and buyers, given the complicated and cross-border nature of many crucial mineral provide chains, the group stated. 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 international locations’ protectionist and interventionist insurance policies, state participation in useful resource extraction and situations of direct and oblique expropriation, resembling asset nationalisation or regulatory modifications that make doing enterprise within the sectors much less worthwhile. (Camilla Hodgson)

Energy Factors

Power Supply is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with help from the FT’s international workforce of reporters. Attain us at vitality.supply@ft.com and comply with us on X at @FTEnergy. Make amends for previous editions of the e-newsletter right here.