In the early days of the oil industry, the United States quickly rose to prominence as the world’s largest producer and consumer of oil.

But over time, the depletion of American reserves and discoveries abroad led to the fact that the dominance of the United States in the oil industry weakened. Although America remained the world’s largest consumer of oil, it became increasingly dependent on foreign raw materials.

The US has a rare new chance to restore energy independence with the shale boom. But the lessons we have learned from the evolution of the oil industry are directly relevant to the current energy transition.

Oil was the raw material that fueled the growth of the global transportation industry in the last century. But in the 21st century, lithium will be such a critical commodity. American automakers are aiming for 40% to 50% of new car sales to be electric vehicles (EVs) by 2030. This will lead to a huge increase in lithium consumption.

“It is estimated that by 2034 the US alone will need 500,000 metric tons of crude lithium per year for electric vehicle batteries alone. Today, the U.S. produces only a fraction of that,” California-based lithium-ion battery supplier OneCharge said in a report.

Just as the US eventually ceded its oil lead to other countries, it is doing the same with lithium. According to BP’s 2021 statistical review, China holds 7.9% of the world’s lithium reserves. The US has 4.0%. However, China has become the third largest producer of lithium in the world, surpassing the US in 2020 by more than 15 times.

This dominance is not accidental. Over the past decade, China has spent more than $60 billion building a lithium industry. U.S. investment in this sector has lagged far behind, allowing the PRC to build a robust supply chain.

In addition, China has invested heavily in the production of lithium-ion batteries. Thus, if lithium is analogous to oil, then the production of lithium-ion batteries is analogous to oil refineries and chemical plants that turn this oil into finished products. And here the United States is lagging behind.

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China controls the lion’s share of the global lithium-ion battery supply chain, and its market share has grown another 12% in the past two years. There is a real danger that China will become for lithium what OPEC was for oil.


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