未來能源研究所-什么是“礦產(chǎn)安全”需要什么政策來實(shí)現(xiàn)？石油安全的教訓(xùn)（英）

WhatIs“MineralSecurity”andWhatPoliciesAreNeededto

AchieveIt?LessonsfromOilSecurity

MichaelA.TomanandDouglasR.Bohi

WorkingPaper24-16

September2024

AbouttheAuthors

MichaelA.TomanreturnedtoRFFasaseniorfellowin2021afterstintsattheWorldBankDevelopmentResearchGroup,RANDCorporation,andtheInter-American

DevelopmentBank.MikeservedasaSeniorStaffEconomistattheWhiteHouse

CouncilofEconomicAdvisersfrom1994–1996.Hiscurrentresearchinterests

includereductionofagriculturalgreenhousegasemissions,criticalmineralsfor

decarbonization,marketsforemissionreductioncredits,andclimatechangepoliciesindevelopingcountries.MikehasaBAfromIndianaUniversity,aMScinapplied

mathematicsfromBrownUniversity,andMAandPhDdegreesineconomicsfromtheUniversityofRochester.

DouglasR.BohiwasaSeniorFellowatRFFfrom1978to1997,whereheworkedonavarietyofissuesrelatedtoenergysuppliesanddemands,internationaloilsecurity,andregulationinthepowersector.DuringthattimehewasonleavefortwoyearsasChiefEconomistattheFederalEnergyRegulatoryCommission.AfterleavingRFF,Doug

workedformanyyearsatCharlesRiverAssociates,focusingonindustrialorganizationandregulationinthepowersector,beforehisretirement.

AboutRFF

ResourcesfortheFuture(RFF)isanindependent,nonprofitresearchinstitutionin

Washington,DC.Itsmissionistoimproveenvironmental,energy,andnaturalresourcedecisionsthroughimpartialeconomicresearchandpolicyengagement.RFFis

committedtobeingthemostwidelytrustedsourceofresearchinsightsandpolicysolutionsleadingtoahealthyenvironmentandathrivingeconomy.

Workingpapersareresearchmaterialscirculatedbytheirauthorsforpurposesof

informationanddiscussion.Theyhavenotnecessarilyundergoneformalpeerreview.TheviewsexpressedherearethoseoftheindividualauthorsandmaydifferfromthoseofotherRFFexperts,itsofficers,oritsdirectors.

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WhatIs“MineralSecurity”andWhatPoliciesAreNeededtoAchieveIt?LessonsfromOilSecurityii

Abstract

TheneedtoenhanceUS“criticalmineralsecurity”isarecurrentpolicytheme.In

thispaperweexaminesecurityissuesforthecriticalmineralsusedtoproduceEV

batteries.Weexaminethoseissuesthroughthelensofconcernsaboutinternationaloilinsecurity,amajorenergypolicyconcernfortheUnitedStatesinthepast.Wediscusssimilaritiesanddifferencesbetweenthefactorsaffectingcriticalmineralsecurity

andinternationaloilsecurity,drawingonpolicylessonsfromyearsofresearchoninternationaloilsecuritypolicytofindlessonsforidentifyingandmanagingmineralsecurityissues.

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Contents

1.Introduction1

2.CriticalMineralSecurityRisks1

3.OilInsecurity:Background4

4.ObservationsfromOilSecurityResearch5

5.BatteryMineralsVersusOil7

6.LessonsforBatteryCriticalMineralsSecurityPolicy8

6.1.Supplyrisks8

6.2.Economicvulnerabilities9

6.3.Potentialpolicyresponses9

7.ConcludingRemarks11

8.References12

WhatIs“MineralSecurity”andWhatPoliciesAreNeededtoAchieveIt?LessonsfromOilSecurityiv

1.Introduction

Criticalminerals(CMs)aresubstancesidentifiedbyuniquepropertiesthatmake

themdifficulttoreplaceinthenearerterm.Thus,theiravailabilityandaffordability

raisesimportantconcernsformineralpoliciesintheUnitedStates1SeveralCMs,

includingcobalt,graphite,lithium,nickel,andmanganese,figureprominentlyinthe

manufactureofbatteriesforelectricvehicles(EVs).Othermineralsknownasrare

earthsplayimportantrolesinthedesignandmanufactureoftheelectromagnetsusedinEVmotorsandlargewindturbines.CMsthusareimportantforenergypolicyaswell.Becausesuchmaterialsplayimportantrolesinadvancedmanufacturingandnationaldefensetechnology,theyalsoarerelevanttoeconomicanddefensepolicy.

TheneedtoenhanceUS“criticalmineralsecurity”isathemeunderlyingvarious

proposedpolicies.2However,thattermhasseveralinterpretationsdependingonthesubstancesandusagesinvolved.Inthispaperweexaminesecurityissuesforthe

CMsusedtoproduceEVbatteries,asidentifiedabove.3Weexaminetheissuesfor

thosemineralsthroughthelensofconcernsaboutinternationaloilinsecurity,amajorenergypolicyconcernfortheUnitedStates.WediscusssimilaritiesanddifferencesbetweenthefactorsaffectingCMsecurityandinternationaloilsecurity,drawingonpolicylessonsfromyearsofresearchoninternationaloilsecuritytofindlessonsforidentifyingandmanagingmineralsecurityissues.

2.CriticalMineralSecurityRisks

Discussionsofcriticalmineralsecuritytypicallyaredirectedattworisks:(a)an

ongoingsignificantreductionorcutoffofsupplybyahostiledominantsupplier,

motivatedbygeopoliticalorotherconflicts,thatcouldaffectmilitarypreparednessaswellaseconomicinterests;and(b)persistenceofuncompetitivelyhighpricesfrom

theexerciseofmarketpowerbyglobalsupplierswithlargemarketsharesandthe

capacitytosuppresscompetition.Sometreatmentsofthesubjectalsoincludeathirdrisk,volatilityofpricesinCMmarkets,leadingtouncertaintiesthatcanhampernewinvestmentstodiversifyCMsupplies(wereturntothistopicbelow).

1TheUScriticalminerallistasidentifiedbythesecretaryoftheInteriorisfoundinthe

FederalRegister,

/content/pkg/FR-2022-02-24/pdf/2022-

04027.pdf

.AmoreexpansivelistofcriticalmaterialsidentifiedbytheSecretaryofEner-gyundertheEnergyActof2020isfoundintheFederalRegister,

info.

gov/content/pkg/FR-2023-08-04/pdf/2023-16611.pdf

.

2See,forexample,RundeandHardman(2023),AspenInstitute(2023),andOurEnergy-Policy(2024).

3Rareearthshavemorecomplexproductionprocessesandplaydifferentrolesinthe

economyandnationalsecurity.Thecurrentdominationoftheirextractionandprocess-ingbyonecountry,China,impliesdifferentcircumstancesthanapplytobatteryminerals.

WhatIs“MineralSecurity”andWhatPoliciesAreNeededtoAchieveIt?LessonsfromOilSecurity1

Risks(a)and(b)requireahighconcentration(largemarketshare)inextractionor

processingofCMs.Figures1-3shownationalsharesinbatterymineralsextraction

andprocessing,aswellasthespatialdistributionofmineralreservesthatcanbeusedforfutureextraction.ThefiguresshowthatChinahaslargesharesintheprocessingofseveralbatteryminerals,whereasproductionismoregeographicallydiversewiththenotableexceptionofgraphite,whichChinaalsodominates.Reservesaremore

geographicallydiversethancurrentextraction.

Figures1and2showthatChina’slargesharesinprocessingseveralbatterymineralsisnotexplainedbyanaturaladvantagefromproximitytomineraldeposits.As

discussedbelow,China’ssharesinprocessingresultfromalong-termindustrialpolicy.Inaddition,China’sprocessingsectorisnotmadeupofafewGoliathenterprises.Forexample,Chinahasabouthalfadozenlargeormediumlithiumprocessingcompaniesanddozensofsmallerones.Thus,foreithergeopoliticalormarketpowerrisksto

materialize,ChinawouldneedtoexertstatepowerovertheCMsector.

Figure1.Distributionofbatterycriticalmineralextraction,2021

Sources:EstimatesbasedonUSGS(2023);NMIC(n.d.);Idoineetal.(2023);ReichlandSchatz

(2023).

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Figure2.Distributionofbatterycriticalmineralreserves,2023

Sources:EstimatesbasedonUSGS(2023).

Figure3.Distributionofbatterycriticalmineralprocessing,2021

Sources:EstimatesbasedonUSGS(2023);NMIC(n.d.);Idoineetal.(2023);ReichlandSchatz

(2023).

WhatIs“MineralSecurity”andWhatPoliciesAreNeededtoAchieveIt?LessonsfromOilSecurity3

3.OilInsecurity:Background

Twoelementscharacterizedconcernsaboutoilinsecurity(BohiandToman1993,

1996).ThefirstwasthehighcostofoilimportsbecauseofhighpricesmaintainedbytheOrganizationofOilExportingCountries(OPEC).BecauseofOPEC’slargemarketshareandreservecapacity,importsfromOPECwerethemarginalsourceofglobaloilsupply.ItwasfearedthatOPECwoulduseitsmarketpowertosetpricesabovethe

costofproduction,therebyextractingeconomicrentfrompurchasersofitsoil.Its

marketpower,itwasargued,alsoallowed“predatorypricing”—usingreservecapacitytotemporarilyreducepricesbyexpandingoutput,therebyundercuttingdevelopmentofcompetingsupplysources.

Thesecondelementofoilinsecuritywastheperceivedvulnerabilityofoil-using

economiestosuddenjumpsinoilprices.Althoughsuchjumpscouldhaveseveral

causes,themainconcernwasinstabilitiesinMiddleEasternOPECcountries.EvensmallreductionsintheavailabilityofimportedoilfromOPECcouldcausesignificantpriceshocks,giventhetightnessinoilmarketsatthetime.Itwasfearedthatthosepriceshockswouldcausebusinessescontractionsandhigherunemploymentaswellasjumpsintheoverallpricelevel.

Concernsaboutexcessivelyhighpaymentsforoilimportsledtoincreasedtaxbreaksforthedomesticoilindustry,moreintensiveoilleasinginpubliclands,andtheill-fatedefforttoprovidealternativestocrudeoilthroughtheSyntheticFuelsCorporation

(DíazAnadónandNemet2013).Manyanalystsarguedforatariffonoilimportsasa

waytorecapturetherentsbeingcapturedbyOPEC.Ultimately,however,bothpoliticalandeconomicconcernsabouttheeffectsofhighoilprices,undercutsupportforthatpolicy.

Lessexposuretopriceshocksbyreduceddependenceonoilimports,itwasargued,wouldreducemacroeconomicharms.Thisfocusonimportsobscuredthefactthat

anymacroeconomicvulnerabilitytooilpriceshockswoulddependontheamount

ofoilconsumption,implyingaroleforconservationandimprovedenergyefficiency.

Concernaboutmoderatingthesizeandpotentialdurationofoilshocksalsoledto

theestablishmentoftheStrategicPetroleumReserve(SPR).Originallysetupasa

responsetothemisplacedfearofaquantitativerestrictioninsupplytotheUnited

States,theSPRcametobeseenasasafeguardagainstespeciallylargeandpersistentoilpriceshocks.However,tothisdaythereisnoaccordonwhenandhowthereserveshouldbeused.

Changesinthestructureofoilmarketsthemselveswereacceleratedbythedisruptionsinthe1970s.The1973oilshockwasnotanembargo,despitefrequentreferencetoit

assuch.Suchatargetedreductioninoilsupplytosinglecountrieswasnotpossible,

giventhebasicfungibilityofoilandthespatiallyinterconnectednatureofinternationaloiltrade.Followingthe1973shock,movementawayfrombilaterallong-termtrading

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betweenmajoroilsuppliersandpurchasersaccelerated.4Inplaceofbilateraltradewithlong-termpricing,therewasmajorexpansioninoiltransactionsthroughorganized

spotmarketswithmoretransparent,market-determinedprices.Followingthese

developmentswastheemergencebythe1980sofactivederivativesmarketsforriskmanagement,includingfuturesandoptionscontracts.

4.ObservationsfromOilSecurityResearch

Perhapsthemostimportantlessonfrompastoilshocksandpolicyresponsesto

themisthatoilmarketsactuallyworkedtoallocateavailablesupplies.5Higherpricesultimatelystimulateddemand-sideadjustmentsovertime,aswellasproviding

incentivesforincreasingnon-OPECsourcesofsupply.Asnoted,thestructureofoilmarketsalsoadjustedtoreflectnewrealities.

ResearchhasalsocalledintoquestionthecharacterizationofOPECasacartelwith

strongpowertosetoilprices.Atbest,accordingtothisresearch,OPECcouldbe

calleda“clumsycartel”(Adelman1980;seealsoGately1984andAlhajjiandHuettner2000).Althoughcoordinationamongitsmemberscouldinfluenceshort-termtrends,OPECwasnotaneffectivelonger-termpricesetter.Inpartthisreflectslongstandingdifferencesinreserveholdingsandnationalobjectives,suchasthedesiretoincreasenear-termrevenuesversusthedesiretomaintainmarketstabilityandmitigate

developmentofcompetingoilandotherenergysourcestoprotectlonger-termreservevalues.6

Sincethe1970s,moreover,oilpriceshockshaveoccurredforseveralreasonsnot

relatedtoOPECbehavior,includingpoliticalinstabilityandthreatsofconflictintheMiddleEastaswellasdemandsurgesduetoweatherorhigher-than-predictedglobaldemandgrowth.Moreover,oilpriceshocksarenotjustaconsequenceofchanges

inprimarysupplies.The1978–1979marketdisruptionshowedthatamajorpotential

4Long-termbilateralcontractswithstablepriceswerepopularsolongasoil-producing

countriesplayedlesserrolesinsupplydecisionmaking,andsolongastheUnitedStateshadlargeexcessproductioncapacityandcouldplaytheroleofswingproducer.As

globalmarketstightenedintheearly1970s,excessUSproductioncapacitydeclined,andoil-producingcountriesinsistedonmorecontrolovertheirresources.Bilateralcontract-ingwithstablepricesthencouldnotclearthemarket,givenallthevarioussourcesof

supplyanddemanduncertainty;norcoulditprovideoptionsforbuyersseekingmorecompetitivelypricedsupplies.Oilbecameacommodity,andthemovetospottransac-tionsfollowed.

5Thiswastrue,thoughmoredifficult,evenwiththeoverlayofacomplicatedsystemofpricecontrolsandoilallocationinthe1970s.

6TheargumentthatOPECisacartelcontradictsadvocacyofanoilimporttarifftorecap-tureostensiblecartelrents.Disorganizedsupplierswithrelativelylimitedinfluenceon

oilpriceswouldhavetoacceptthepriceeffectsofanoiltariff;anorganizedcartelcouldretaliate.

WhatIs“MineralSecurity”andWhatPoliciesAreNeededtoAchieveIt?LessonsfromOilSecurity5

sourceofoilpriceinstabilityisdemand-sideexpectationsoffutureoilmarkettightness,whichcandriveupinventoryholdings(Bohi1987,1991a).Subsequentresearchhas

borneoutthatoilpriceshockscanbetheresultofmacroeconomicconditionsandoildemandbehavior,ratherthanadriverofthemacroeconomy(BarskyandKilian2004).

Themechanismsthroughwhichoilpriceshocksmightadverselyaffectthe

macroeconomyaremorecomplicatedandambiguousthanpreviouslyrealized.The

shareofoilintotaleconomicvalueaddedwasnotsohighthatrecessionandjumpsintheoverallpricelevelcouldbeattributedjusttooilpricejumpsandincreasedpaymentsabroadforoilimports.However,timeseriesmodelsdidseemtoshowaconnectionfortheshocks(Hamilton1983).Thisledtotheoriesthatbecauseoiluseisubiquitousin

theeconomy,acascadeofdisequilibriumproblems,includingbusinesscontractionandunemployment,wouldfollowoilpriceshocks.

Subsequentworkrevealeddifficultieswiththisformulation.Bohi(1991b)provided

evidencethattheempiricallinkbetweenoilpricejumpsandeconomicdownturnswashardtoseparatefromotherinfluences,suchastheroleofanti-inflationaryFederal

Reservemonetarypolicyinthe1970s.BohiandPowers(1993)showedthatregional

economicchangesoverthe1978–1980periodofrisingpricesandthe1985–1987periodoffallingpriceshadmoretodowithmonetarypolicythanoilpricemovements.BarskyandKilian(2004)calledintoquestionthemacroeconomiceffectsoflargeoilprice

changes(upanddown)fromthe1970sthroughthe1990s.ResearchbyBrownandYücel(2002)andBalkeetal.(2010)indicatedthatanyeconomicharmfromoilpriceshocks

seemedmuchweakerinsubsequentepisodesofoilpricejumpsthaninthe1970s.Kilian(2014)showedthateconomiceffectsofoilpriceshocksdependedonoildemandas

wellassupplybehavior.ApointemphasizedbyKilian(2014),Balkeetal.(2010),andBaumeisterandKilian(2016)isthatoilpriceshocksarenotagivenbutemergefromacomplicatedsetofgeneralequilibriumconsiderations.

Incontrasttothesubstantialbodyofresearchonthemacroeconomicsofoildisruptions,researchonpolicyformanagingtheSPRwassparseandhashadnovisibleeffecton

actualSPRmanagement.ResearchshowedthattheeconomicallyefficientsizeoftheSPRdependedinasystematicwayonprivate-sectorexpectationsoftheseverityandpersistenceofoilpriceshocks,aswellastheeconomicvulnerabilityoftheeconomytothoseshocks.EconomicallyefficientdrawdownoftheSPRinturnwoulddependonthesameexpectationsandonthesizeofthereserve(Murphyetal.1985,1986).

Inpractice,however,thesizeoftheSPRhasbeendeterminedprimarilybybudgetary

considerationsandadesireonoccasiontohelpboostdomesticoilsales.Drawdown

policyisleftunstatedoutoffearthatspecifyingplansinadvancewouldinvitehostile

responses.Thereisapointtothisfear—notwithrespecttooilexportersbutratherwithrespecttospeculatorswhowouldincorporateanticipatedSPRdrawdowns(orrefills)

intotheirplans.However,leavingdrawdownpolicyunstatedmeansthatnoonecan

anticipatethegovernment’sresponsetoanoilpriceshockandbuildthatintotheirownoilpurchasedecisions—inparticular,toeschewpanicbuying.Inpractice,theSPRhasbeenusedononlyafewoccasions,andepisodicallyitsusehasbeenapoliticalfootball.

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HorwichandWeimer(1984)proposedcuttingthisGordianknotby,ineffect,

convertingtheSPRintoacentralstorehouseforoilinventoriesthatprivatesectoractorscouldmanagebypurchasingcalloptionsfromanauthorityinchargeofthereserve.ThecalloptionswouldspecifythestrikepriceatwhichSPRoilwouldbe

deliveredtocontractholders(HorwichandWeimersuggestedoptionsworkingonarollingbasiswithastrikepriceequalto110percentofthecurrentprice,nineto12weeksintothefuture).Theexerciseoftheoptionswouldprovideahedgeagainst

risingoilpriceswithoutindividualparticipants’havingtopaythestoragecostof

individualinventoryholdings.7However,sincegovernmentofficialssawtheSPRasanationalsecurityassetrequiringpublicsectorcontrol,thisideadidnotgaintraction.

5.BatteryMineralsVersusOil

Thefocusinoilsecurityanalysisoneffectsofsuppliermarketpowerandeconomic

risksfrompricejumpswillstrikeafamiliarchordamongthoseinvolvedinstudyinganddebatingpolicyformineralsecurity.However,therearealsodifferencesthatneedtoberecognized.

ExtractionofCMsforuseinEVbatteriesismuchmoregeographicallyconcentratedthancrudeoilextraction.Nevertheless,thenumbersdonotimplythateconomic

competitionisinherentlylacking.Marketpowerinrefiningbatterymineralsispossible,giventhehighgeographicalconcentrationinChinaforseveralCMs.(Forcomparison,imaginethat70percentofglobaloil-refiningcapacitywaslocatedinandcontrolled

byonecountry.)Asnoted,however,thatconcentrationisaresultofChineseindustrialpoliciesratherthananinherentnaturaladvantage.

Therealsoaresomedifferencesintherelevantsupplyanddemandelasticities.Inthecaseofcrudeoil,advancesinextractionandexploration,includinghydraulicfracking,haveincreasedelasticitiesofsupply.Evenwhendownturnsinoilpricessqueezemoremarginaloperators,productioncapacitytendstoreturnfairlyquicklywhenoilpricesrebound.Near-termdemandelasticitiesforoilproductstendtobefairlylow,buttheycanincreaseinthemediumterm(e.g.,throughcarpoolingandreplacementofoilheatwithheatpumps).

ForbatteryCMs,shorttomediumelasticitiesforbothsupplyanddemandare

low.Higherpricescanleadtosomeincreaseinextractionfromexistingdeposits,

butdevelopmentofnewdepositscantakeadecadeormoreandinvolvemajor

commitmentsoffinancialandhumancapitalaswellastimeforpermitting(IWG2023).Ongoingresearchanddevelopmentcanincreasetherateofresourcerecoveryfromexistingmines,shiftingoutwardmineralsupplycurves,butnotnecessarilyincreasingtheirpriceelasticities.Mineralsprocessingalsoisaverycapital-intensiveprocessforwhichitisdesirableinamarketeconomytomaintainfairlyhighcapacityutilization

rates,thusimplyinglowshort-tomedium-termpriceelasticities.

7AccordingtoHorwichandWeimer(1984),theSPRauthoritywouldfollowpresidentialdirectivestoeitheruseproceedsfromthesalestorefilltheSPRorallowthereservetodecline.

WhatIs“MineralSecurity”andWhatPoliciesAreNeededtoAchieveIt?LessonsfromOilSecurity7

Near-termdemandelasticitiesforbatterymineralstendtobelowbecauseatleastsomeEVmakershaveongoingcommitmentstocertaindesignswithbatterymakers.Thislock-inslowsdownandraisesthecostofmodificationstobatterychemistries,thephysicalconfigurationofbatteries,andtheirlocationinvehicles.Batterymineral

demandelasticitiescanbenudgedhigherinthelongtermbyvaryingbattery

characteristics.Forexample,theNMC(nickel-manganese-cobalt)batteryandtheLFP(lithium-ironphosphate)batterybothrelyonlithiumandgraphite,buttheLFPuses

onlyiron,phosphorus,andoxygenalongwithlithiumandgraphite.8Ongoingresearchintobatterydesignsusingdifferentinputsorlowerquantitiesofcurrentinputswill

furtherincreaselong-termdemandelasticitiesforbatteryminerals,buttheeffectsintheneartermwillbelimited.

MarketslikethoseforbatteryCMs,withrelativelylownear-termsupplyanddemandelasticities,alsotendtoexhibitgreaterpricevolatility.However,unliketheglobal

oilmarket,muchofthetradeinbatterymineralsoccursthroughbilateralcontracts,

thoughthereisanincreasingtendencytotrytoindexpricestomarketconditions.

Thisimpedespricediscoveryandhampersdevelopmentofderivativesmarketsforriskmanagement(see,e.g.,Wu2024).

6.LessonsforBatteryCriticalMineralsSecurityPolicy

6.1.Supplyrisks

IfOPEChadexercisedsignificantmarketpower,animportantreasonwouldbethe

accidentofgeologythatresultedinsubstantialoilreservesinitsmembercountries.ThecaseofbatteryCMsisdifferent.Forthemostpart,suppliesofunprocessedrawmaterialsarenotdominatedbyonecountry.China’scurrentdominanceinprocessingseveralofthosemineralscanbereduced,ifdesired,byconcertedindustrialpolicieselsewhere.

KannanandToman(2024)analyzeevidenceonChineseexerciseofmarketpower

overprocessedminerals.TheyarguethattheevidenceismixedontheextenttowhichChinacouldselectivelyrestrictsupplies,giventhecurrentstructureofthemarketsfortheseminerals.9TheyalsonotethatChinahasastronginterestinsecureCMsupply

8However,theLFPalsohaslowerpowerandrange.

9Chinadidapparentlyreduceexportsofsomerareearthsforashortperiodoftimeinthefallof2010overanunrelateddisputewithJapan.Pricesincreasedtenfoldanddidnot

declineuntilpartwaythrough2011.Thepriceincreases,likelyexacerbatedbyspecula-tivepurchasesoftherareearths,suggestChinaprobablyhadnotjustselectivelycurbeddeliveriestoJapan.MoredirectevidencefromdataonJapaneseimportsduringthe

periodindicatenosuddenanddramaticshortfallindeliveries(Johnston2013,24-26;EvenettandFritz2023,32-33).

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