Published August 5, 2022 | 2 min watch
Key Points
- Governments need to consider both energy security and the energy transition in future policy.
- Near-term responses to supply shortages cannot be allowed to derail investment in long-term solutions.
- Within the transition, securing supplies of critical minerals is a high priority, without which the US risks a new politics of dependency.
There are now critical questions about whether the Russia-Ukraine war has dented momentum among governments around the world to pursue net-zero strategies. In some cases, they are now considering bringing back more coal production in response to near-term supply shortages, as well as further oil and gas exploration. These moves raise the question of what government policy actions are going to look like over the long term.
Will Russia become a major commodity player again?
How the global energy system recalibrates will largely depend on Russia’s role as a major commodity exporter going forward. Russia has been hit with unprecedented sanctions – the first time a G20 central bank has ever been sanctioned. And there’s no telling when those sanctions will end, or whether and how fast Russia can recover.
“Global commodity markets are being reshaped in ways that will be critical to the world economy’s future, profoundly altering trade production patterns and consumption over decades.”
Helima Croft, Head of Global Commodity Strategy and MENA Research, RBC Capital Markets
We can’t predict whether Russia will play a major role as a commodity exporter going forward – whether it will retain the ability to secure necessary financing, critical equipment, and the host of services that would enable it to remain a major commodity player. Where Russia finishes up after the conflict will have a high impact on future supply and demand.
Securing the future in minerals
Governments must also reckon with the energy transition. The two issues of energy supply and the energy transition are not mutually exclusive. They are interlinked – and progress towards a solution must consider both aspects equally.
Securing the energy supply is crucial, but so too is securing the critical minerals necessary for a successful energy transition. The US and other major economies will need to source the raw materials and consider whether to invest in their own processing plants or risk a new politics of dependency akin to our reliance on fossil fuels sourced on foreign shores.
