Even ignoring the pop-up ads for lithium producers, serious observers have expressed concerns about the adequacy of those resources. For one thing, the booming demand for lithium-ion batteries for electric vehicles and backup power systems (from household level to utility-scale) has caused some to worry whether the lack of lithium resources will constrain efforts to electrify the economy. Both neo-Malthusians and opponents of electric vehicles appear to have seized on this issue for their varying purposes, but these fears primarily reflect ignorance of resources. It is worth noting that many who worry about peak lithium also feared peak oil not long ago, which supports the thesis that a poor understanding of resources lies behind fears of ‘peaking,’ rather than actual scarcity.
First and foremost, the “peak fill-in-the-black” represents a mindset rather than an analytical hypothesis. Neo-Malthusians embrace the notion that resources are insufficient to support the current or projected population, at current or projected income levels, and therefore conservation and a simpler lifestyle should be pursued, if not mandated. The most extreme case are those who fear overpopulation so intensely that they seem to prefer massive dieoffs from disease as pre-emptive solutions.
But given that the world is facing an enormous ramp-up in demand for lithium-ion batteries for electric vehicles, there is a more sober concern that global lithium resources might be insufficient. As one commentator noted, Telsa alone is projected to need 8,000 metric tons of lithium a year by 2020 to build its cars and Powerwall home battery systems. He went on to note that resource estimates of lithium appeared to be increasing, but were only likely to support a couple of decades of accelerated consumption.
It is very true that estimates of lithium resources have increased, but not just recently. (See figure below) Like pretty much all nonrenewable resources (minerals and energy), estimates of resources tend to increase over time because of the very nature of the estimates. Few if any represent the total resource, but instead are of the amount thought to exist with high confidence and to be recoverable with current technology and economics. Geologists might understand that technological advances will increase the amount of the resource that can be recovered economically, but they are loath to attempt to predict that progress or make quantitative estimates of it. Thus, as knowledge and technology improves, so do resource estimates.
Reserves are a different matter from resources, and some analysts are concerned that they aren’t growing rapidly and that they are concentrated in a small area. As one put it, “But in an even stranger twist of fate, most of the world’s reserves of lithium carbonate are located in a tiny triangle located high in the Andes Altiplano, a remote, high desert region shared by Chile, Argentina and Bolivia.”
And reserves have grown slowly, as the figure showed. This is because existing reserves are quite adequate and there is no need to find and develop new reserves; they would go unproduced because of cheap, abundant already-developed reserves. The concentration of production in the Andes doesn’t represent a lack of global resources, as some fear, but the economically rational decision to exploit the cheapest resource first, turning to other, more difficult (and expensive) resources later.
Needless to say, booming demand for lithium to make batteries for electric vehicles could mean that the market for lithium tightens, but this is a question of production capacity, not resource availability. Although, as with oil, a short-term price spike will no doubt be misinterpreted as due to scarcity and irreversible: A “new paradigm” just as every bubble has been labelled throughout investment history, despite all evidence to the contrary.
Hopefully, there will not be the same kinds of response seen in other bubbles, as when the U.S. established the Synthetic Fuels Corporation in the 1970s to deal with the fact that “The oil and natural gas that we rely on for 75 percent of our energy are simply running out.” (President Carter 1977) Or, in a more recent case, a short-term price spike for silicon-based photovoltaic panels encouraged investment in Solyndra, with its expensive copper indium gallium selenide panels, that proved uneconomic when the price of silicon panels declined cyclically.
Highlighting, again, the political risk for companies in the electric vehicle industry, as they are heavily dependent on government support. Lithium resources are terrestrially abundant and lower grade ores could easily become attractive with new extraction technologies and/or price increases, meaning boom and bust will almost certainly be standard in the future, but hopefully without effecting wild policy or investment swings. As with all mineral and energy commodities, despite their “finite” nature and the many peakists swearing ‘this time is different,’ the solution to high prices will be high prices.
