In the early days of the oil industry, the U.S. quickly established dominance as the world’s most important producer and consumer of petroleum. But over time, depletion in the U.S. and discoveries abroad caused U.S. dominance of the petroleum industry to fade.
The U.S. received a rare second chance to regain energy independence as a result of the shale oil boom. But the lessons we have learned over the evolution of the oil industry have direct implications as the world transitions to new sources of energy.
Petroleum was the raw material that enabled the growth of the global transportation industry over the past century. But increasingly in the next century, it is lithium that will be the critical commodity. U.S. automakers aspire to have 40% to 50% of new vehicle sales by 2030 be electric vehicles (EVs). This will result in a tremendous increase in lithium consumption
It is estimated that the U.S. alone will need 500,000 metric tons per year of unrefined lithium by 2034 just to power EVs. The U.S. produces just a fraction of that today. The current global production of lithium in 2020 was about 440,000 metric tons of lithium carbonate equivalent (LCE, contains about 18% of pure lithium), and not all of that is in pure enough form for batteries.
But just as the U.S. eventually ceded its petroleum security to foreign countries, it is in the process of doing the same with lithium. According to the 2021 BP Statistical Review, China has 7.9% of the world’s lithium reserves. The U.S. has 4.0%. (The majority of global lithium reserves are in South America and Australia). Nevertheless, China has become the 3rd largest lithium producer in the world, outproducing the U.S. in 2020 by more than a factor of 15.
This dominance didn’t happen by accident. Over the past decade, China has spent over $60 billion to build its lithium industry. U.S. investments have lagged significantly behind, which has enabled China to build a robust lithium supply chain.