The war between the US and Israel on one side and Iran on the other may have all sorts of lasting political ramifications, but the economic effects are starting to be felt already amid the blockade of the Straits of Hormuz.

As the backlog of stranded oil tankers grows, raised oil prices are already feeding through to petrol and diesel prices on forecourts around the globe, with further concerns that a lasting conflict could lead not just to higher prices, but outright shortages.

With the UAE announcing it will leave OPEC, uncertainty is deepening and, following the energy price shock that followed the Russian invasion of Ukraine in 2022, many motorists may wonder how often they may be hit in the pocket due to events in a turbulent world.

 

Could The Oil Shock Steer Drivers Towards Electric Vehicles?

The crisis may encourage an acceleration of the trend towards electric vehicles and away from petrol and diesel. This process is happening already, but the cost advantages of using electric vehicles and the greater certainty of energy supply will both be obvious incentives.

The consequence of that would be an increase in demand for electric cars and the batteries that power them, which would, in turn, mean faster growth in the need to mine, extract and process lithium.

Such news comes at a key moment for lithium in Europe.

 

Is Europe Able To Supply Its Own Lithium?

As Euractiv reports, Finland has just become the first European country to establish a full mining and refining operation from the ground to the factory gate.

The mine, based near the small town of Kaustinen, has just commenced extraction, although it will not be fully open for two years. The lithium is to be processed at a facility just over 40 km away.

Highlighting the importance of extracting battery-grade lithium in Europe, CEO of the mine Hannu Hautala told news agency AFP: “It develops and increases the independence from imports from, for example, Asian countries and Australia.” 

Western Finland has some of the biggest lithium deposits on the continent, but the UK also has some and work is progressing on establishing these in Cornwall and County Durham.

These include the operations of the following companies:

  • Cornish Lithium, which has been developing a thermal brine extraction site near Redruth and hard-rock extraction at a site near St Austell
  • British Lithium, which is developing its own site in the St Austell area
  •  Weardale Lithium, which has planning permission for a thermal brine extraction plant at Eastgate in County Durham

However, the BBC notes, the UK will need to increase its refining capacity and build more gigafactories if the full benefit of domestically-produced lithium is to be realised. Increased demand for EVs may help push this forward.

 

What Does European Lithium Takeover Reveal About American Mineral Plans?

Another European territory with rich critical mineral deposits is Greenland, where US firm Critical Metals has a 92.5 per cent stake in the Tanbreez deposit.

It has just agreed a deal worth $835 million (£619 million) to take over European Lithium, which owns the remaining stake in the site.

While that may be of greater benefit to the US EV battery sector than Europe, the development does continue a wider expansion of lithium extraction and other rare earth mining in the western world, reducing reliance on China in particular.

There may be a certain irony in the greater US investment in lithium in Greenland. While the Trump administration has rejected the science behind climate change and sought to expand oil and gas drilling, it is also preparing for an age when melting ice makes extraction easier.

The US bid to acquire Greenland outright may be linked to this desire to control rare earth resources, as may the critical minerals deal signed with Ukraine. The geopolitical importance of supply security and avoiding a Chinese monopoly is obvious.

 

What Problems Does The West Need To Overcome To Source More Lithium?

American companies can potentially access plenty of other lithium deposits domestically, especially those identified in Wyoming in recent years, but this is currently problematic.

For now, the issue is that the concentration levels of lithium are low and the wage costs of domestic mining are higher than outside the US. But if demand continues to increase and extraction technology develops, this could change before long.

For Europe, the development in Finland needs to be just the start. There are several other major deposits. However, there are some problems there as well, such as the concerted environmentalist campaigns against the exploitation of the Jadar Valley deposits in Serbia.

The British companies have promised a more environmentally sensitive approach than the pollution-prone, water-intensive means of acquiring lithium used in some parts of the world, using cutting-edge extraction technology.

What remains, therefore, is to ensure that the UK has the processing capacity to handle this ‘white gold’, especially in an age where traditional vehicle fuels are subject to acute uncertainty and price shocks.