Photo credit BBC
“The most sought after commodities , metals & energy resources are controlled by a handful of states & organizations. This analysis is to explain the major stakeholders of Oil, Gas & rare earth minerals , the implications of that on geopolitics as well as to open a discussion on challenging their monopolistic practices. “
Throughout history the world has gone to wars with each other for the mere control of the most sought after commodity at the time. As tribes we went to war with each other for the control of hunting territories. Then it was the fertile arable lands , rivers, & water sources. The colonials brough this to a new level with the fight for the control of slaves , spices & trade rouets. As ocean navigation became more convenient & cheaper, the fight escalated for coal, gold , silver , diamonds and lands to grow commercial crops. With the discovery of the motor the phase changed yet again. Then it was for the oil. The wars never ended & each period a group or a couple of individuals emerged victorious & managed the commodity at question, profiteering to the world’s end. The lesson learnt was clear – he who controls the resources controlled the world.
There are three elements that are more important & essential for modern civilisations than anything else . These three elements are responsible for the existence of commerce, science technology, military , health & the very being of us all. Namely Oil , Gas & rare earth have become the most sought after commodities of the 21st century. While every nation consumes those commodities it is pretty interesting to see who controls those three elements. That will give us an accurate picture of the topic in decision.
Oil became the new gold in the 19th century. The rush for oil was far worse than the gold rush. There were two major oil cartels that have ceased to exist or been outflanked by the new ones.
The seven sisters – Anglo-Iranian Oil Company, Royal Dutch Shell ,Standard Oil of California ,Gulf Oil, Texaco, Standard Oil of New Jersey (Esso), Standard Oil of New York.
The big oil – ExxonMobil, Chevron, BP, Shell, Eni and TotalEnergies, with ConocoPhillips
Once the nationalization of the oil resources took effect those companies lost their significance & new cartels were formed. OPEC became the de facto world body for oil. Opec members were mostly from the middle east & africa, namely Qatar, Indonesia, Libya ,United Arab Emirates ,Algeria ,Nigeria ,Ecuador ,Gabon ,Angola ,Equatorial Guinea ,Congo. They controlled 35 % of the world oil supply while being home to 81 % of the proven oil reserves. They were competing with the non OPEC members apart from the American shale oil producers. After realizing the futility of competing with each other, OPEC & non OPEC members decided to work with each other for mutual benefit & prosperity in 2016. This gave birth to a de facto new cartel. The new cartel goes as OPEC plus. That includes Russia,Azerbaijan,Bahrain,Brunei,Kazakhstan,Malaysia ,Mexico,Oman,South Sudan
Sudan. With this alliance now they control a colossal of 55 %of the global supply and are holding 90 % of the proven reserves. This is a marriage of convenience but has worked brilliantly well. The political clout behind this body is unprecedented. It has gone from a mere trading organization to a political heavyweight. The recent retaliation against the America led Russian oil price cap shows the organization’s unchecked strength. They agreed to a historical two million barrels per day production cut. Naturally this will help to stabilize the price but most importantly OPEC Plus not only assumed its capacity but acted on its strengths.
Let’s look at the next element that has become the most controversial topic lately. Gas !!! With growing concerns of climate change & the relatively lower cost , Gas has become a household name from cold Siberia to tropical Sri Lanka alike. While the concept of gas is more greener compared to oil is certainly debatable, Gas has become the single most crucial source of energy for Industrial nations nonetheless. There was no OPEC style well disciplined & fully fledged cartel for gas. Not until the emergence of GECF or the Gas Exporting Countries Forum.: Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, Venezuela are the members of the organization. But what started as an experience sharing forum in 2001 in Tehran has now passed several industry tests & is slowly transforming itself into a gas opec. Surely they are far from that but make no mistake this is what is in the making. Without much ado the most brief description of GECF would show their strength. This is a collection of 19 countries amounting to 71% of the entire global gas reserves with an ongoing capacity of 42% of market production, 55% of LNG exports and 53% of pipeline trade. That is GECF in one sentence . As of now they do not follow a regulated mechanism on price control , production cuts or taking unified stand against changing demands. But there are understandings & mutual respect for market share. The spot market buying habit of European buyers has been recognized as a destabilizer by the producers irrespective of their political views. They have shown preferences for long term contracts which work as a de facto price stabilizer. Iran, Azerbaijan & Russia have been having more coordinated exchanges in selling & exchanging resources amongst them. More members are showing their interest in working with the group & slowly but steadily the organization is now taking the shape of an OPEC type body. They have already formulated a strategy until 2050 taking into consideration the expected demand & change of population. In every possible turn its members have made sure to stop consumers from becoming the controllers of the game. Every hurdle placed upon a new pipeline out of their purview , every merger between the existing ones are such scenarios.
From a gigantic , devastating intercontinental ballistic missile to an eye soothing LED bulb, rare earth is used in a plethora of industries. Electrical and electronic components, lasers, glass, magnetic materials, and industrial processes and a whole range of others rely on rare earth. It is rare and available only in a handful of countries. Military to health to communication to many other critical industries rely on this extremely rare resource. Needless to say, the control of rare earth market gives a country a unique, unchallenged position on the very existence of another. China , Vietnam, Russia, Brazil, India , Australia , United states & Greenland are the top 8 states where proven reserves are found. Now make no mistakes the most sought after Lithium , Cobalt ,Palladium do not belong to those categories although they are rare resources too. Rare earth metals are the fifteen lanthanides on the periodic table plus scandium and yttrium. China provides nearly 90 % of the global supplies, production & processing. That is a stranglehold on the entire planet. They have shown the willingness to weaponize their market hold by stopping supplies to Japan in 2010 & made reference to use it against the USA too.
The natural global distribution of most of these resources seems to be spread in the global south where the BRICS , Shanghai Cooperation Organization groupings hold a major sway. Most importantly, the newly formed eternal friends of Russia – China’s hold on all the three discussed global commodities is unrivaled. By controlling the production , processing , and supply, they hold the key to the pricing factor without having to bother about changing demand. With their unique hold, the centuries old “ demand supply theory” becomes completely obsolete. If the demand is less theory will enforce a production cut forcing the commodity price to stay at a level profitable to the supplier.
This essentially will challenge the existing world order for decades to come. If at all the formation of the multipolar world comes to fruition , the importance of the America led west will be minimal. As it seems , commodities will decide the development & the direction of global trade. With artificial price fixing , the producing cartels will decide how the world functions.
Irrespective of the political support extended to the Global south by Russia – China coalition , no one is exempted from paying for purchase of the three elements. Whether you are a friend or a foe of these states or cartels you will still pay the artificially fixed prices. There will be a global pricing strategy & unless you are part of the camps of those states directly there is absolutely no reason for them to discount the pricing for you. Either way the simple rule of trade is that when a cartel is in control of any essential it is bad news for consumers & good for the cartel.
There are few long term ways to offset the monopolistic hold of the Energy resources and rare earth by a handful of countries. Unfortunately short term fixes are not available unless a revolutionary technology is carried in short order. Australia , America , Canada themselves have untapped resources in oil.gas & rare earth . Those countries could at least ramp up the production to firstly satisfy their own market demand and then increase the output for export . This will have a significant impact on the pricing since the United states itself is one of the biggest consumers of oil,gas & rare earth herself.
The formation of a Gas cartel has to be identified as a strategic threat. Resources should be allocated to counter that & discourage. The world has to come to understand the danger of cartels time & again. While a formation of a gas cartel is a great anti western political slogan in the global south, one must not forget the fact that the bills will still have to be paid.
Thirdly the vast , untapped ocean resources have to be explored. There are hundreds of ocean nations that have access to ocean areas many times larger than the countries themselves. There are identified resources in ocean beds in some of the regions. But there is no initiative from the wealthy nations for technology sharing or investing in those nations. Less investment is allocated allowing predatory investors from cartels to keep plundering those wealth too . If the west could formulate a body to channel investment to carry out oceanographic research work then to develop identified deposits , that will benefit the entire world. It is one thing to cry foul and lambast the predatory practices of some nations & another thing to act on them. The west has to walk their talk & do some serious work on changing this perilous situation which is bad for a majority & only benefits a minority. Otherwise in another hundred years someone will have to write an opinion piece on how a handful of countries & cartels successfully racketeered the global pollution in the 21st century unopposed.