The world’s need for alternate energy sources, electric vehicles and high-power batteries is growing at shocking rates, forging a new group of resources that are becoming the backbone of the global economy. The transition to new forms of energy, lithium, cobalt, palladium and platinum are just as strategically important as oil was a half-century ago. The question is, how can prices maintain stability if these vital resources are controlled by only a handful of suppliers?
Glimpse at the past
History offers a precedent. In 1960, major oil exporters formed the Organization of the Petroleum Exporting Countries (OPEC) to coordinate production and act in the benefit of oil producers. Since its founding, OPEC repeatedly demonstrated its power to influence global oil prices. For instance, during the 1973 oil embargo, the organization was able to restrict supply to countries like the Netherlands, the United Kingdom and the United States.
As a result, oil prices surged. The United Kingdom’s efforts to conserve electrical energy resulted in the introduction of three-day workweeks, severely lowering productivity and increasing unemployment, as well as restricting unnecessary driving on Sundays to preserve fuel. Thousands of miles away, American gas stations closed on Sundays and had limited amounts of refills per vehicle. Later, in the 1980s and 2000s, internal disagreements revealed how supply coordination can both stabilize and destabilize markets.
What are the takeaways?
Two lessons stand out from these historical developments. First, when a small group of producers controls an enormous share of global reserves, they gain the power to move prices. This makes prices extremely volatile during geopolitical and economic crises.
Secondly, the coordination between major producers does not guarantee equal benefits. Countries like Saudi Arabia that hold large reserves and have lower costs repeatedly showcased greater influence over production targets than other members. Economic growth has also varied significantly among members, showing resource coordination does not guarantee balanced progress.
Today’s strategic metal markets resemble the 20th century oil market. Cobalt production is heavily concentrated in the Democratic Republic of Congo, which holds 75% of the market. Lithium output is similarly dominated by Australia and South American countries, while almost half of palladium comes from Russia.
In virtually every case, one or two countries control substantial shares of global output. The IEA reports this market share asymmetry increases price volatility and consumer vulnerability. This means any disruption in producing countries, such as labor fluctuations or geopolitical tensions, can quickly ripple through global prices.
Reimagining OPEC
Would a coordinated “OPEC for Metals” increase stability? Yes, but only if its institutional design improves upon the OPEC model. OPEC’s primary limitation was excluding net importers, which decreased advocacy for consumer benefits.
A more stable model would include both producers and major consumers. Such a framework could require transparent production data, shared strategic stockpiles and coordinated investment in supply expansion. Without concentrated market decision-making power, price volatility could be reduced through economic mechanisms like price ceilings and floors, strategic reserves and production funds for weaker producer nations.
OPEC demonstrates that possession of resources is not enough to ensure success. The success of the economy depends on cooperation and the allocation of benefits.
Critical metals are now the foundation of the global energy system and the digital economy. As demand accelerates, the question is no longer whether these markets matter, but how they will be governed.
Featured image: Photo by Sergei Starostin
Edited by James Sutton & Steven London
