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 stated yesterday that it will 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 every day by the top of the last decade is greater than that of most Opec international locations and would flip the west’s largest producer into a worldwide oil and fuel behemoth.

Exxon’s argument is that it may well produce oil way more cheaply than its rivals, making it greatest positioned to provide what it predicts can 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 vital mineral imports, a parting reward by the president to Beijing as he appears to shore up the nascent US cleantech manufacturing area earlier than leaving workplace. My colleague Aime Williams had the scoop.

That can be the subject of at present’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 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 vital to battery manufacturing and the vitality transition, in line with new analysis. 

Rising geopolitical tensions have fuelled an increase in state intervention and protectionism “not seen for the reason that first half of the twentieth century in western democracies”, world 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 vital minerals equivalent to 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 vital 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 growth of synthetic intelligence. Earlier this 12 months, a coalition of western nations together with the US and UK announced financing plans for minerals tasks in an effort to diversify away from China.

“The fracturing geopolitical panorama and the fallout from main shocks just like the pandemic and Russia’s invasion of Ukraine have spurred an acceleration of insurance policies geared toward buying the minerals wanted to energy the tech and defence industries, in addition to the inexperienced transition to bolster vitality safety,” stated Jimena Blanco, chief analyst at Verisk Maplecroft. 

“State give attention to provide chain safety has opened the door for corporations to make the most of engaging incentive schemes, however geopolitical divergence may more and more restrict alternatives to allied or pleasant jurisdictions,” she stated. 

Based on 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 “vital improve” 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 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 through the interval. It has come as a consequence of protectionist strikes by Berlin such because the seizure of Russian vitality property 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 liable for 41 per cent of worldwide mineral output have been now categorised as being both “excessive” or “very excessive” threat for protectionist insurance policies, the researchers stated. That was a rise from 30 international locations 5 years in the past.

“The most certainly state of affairs is that western nations will more and more use a mixture of commerce and funding insurance policies, together with stricter sustainability requirements, to limit commerce with rivals and push for localised provide chains,” stated Blanco.

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

The evaluation thought-about international locations’ protectionist and interventionist insurance policies, state participation in useful resource extraction and situations of direct and oblique expropriation, equivalent to 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 world crew of reporters. Attain us at energy.source@ft.com and observe us on X at @FTEnergy. Make amends for previous editions of the e-newsletter here.