Troubles in the EV Industry are Impacting Gas Prices?

Allison Stone
Updated on Jul 8, 2022 · 5 min read
Electric cars have been lauded as a beacon of hope in a world that is desperate to reduce its reliance on fossil fuels, but the transition to green energy is proving to have its own caveats as global supply chains struggle to meet demand.
Highly-valuable metals including lithium, cobalt, and nickel are used in everything from electric car batteries to solar panels, they’re already in dangerously short supply. 
A lack of access to lithium in particular is slowing the growth of the electric vehicle segment to a crawl, and manufacturers are already looking for alternatives. The mining process for lithium can also be quite costly as well as hazardous. If access to lithium remains scarce, many governments may have to scale back their goals toward an electric future, and consumers could be stuck paying increasingly higher gas prices in lieu of adopting electric cars. 
The Russian invasion of Ukraine and stricter trade regulations are partially to blame for high gas prices as well, but it doesn’t look like the US is going to be ramping up its domestic production capacity any time soon. Due to stricter environmental demands imposed by federal and state governments, many oil companies are opting out of more drilling or retooling old refineries in lieu of refineries opening abroad. 

What a lithium shortage means for the EV industry

While many of the metals required to make EVs are plentiful within the earth’s crust, mining them is another story. Refining them can also be quite expensive, and is getting even more so as demand for them soars. 
A metals and mining researcher at Belgian University KU Leuven Liesbet Grégoir weighed in on the situation. “Commodity prices have risen, making it more attractive for investors, but there is not enough in the pipeline yet,” Grégoir told Fortune. “Developing mining projects takes time, and there is a real risk we’re not starting early enough.”
Much demand for EVs and renewable energy sources comes with outside pressure from governments that have set lofty goals to reduce their carbon footprints in the coming years. With so much time and money being invested into developing EVs already, a lack of access to necessary minerals could mean a massive reformulation of goals is in order. 

Tightening trade regulations mean less exports

China, which controls 80% of the rare earth metal refining industry, has tightened regulations on rare earth exports to the U.S. and implemented laws that give Beijing more control over supply chains. 
In 2019, Europe received 98% of its rare earth mineral supply from China, while the U.S. counted on China for 80% of its supply. 
Some experts believe that the key to stabilizing the rare earth mineral supply could be recycling, but the recycling process for reusing lithium, nickel, and cobalt is extremely energy-intensive. As deadlines to meet net-zero carbon emissions approach in the coming years, some experts argue that even a 100% closed-loop recycling system would not be enough to meet demand.

What this means for gas prices

If electric car manufacturers are unable to meet demand, many drivers may continue to have to rely on gas-powered cars at increasingly higher fuel prices, but why are fuel prices so high? 
According to CNN, even without tightening trade regulations or sanctions on Russian imports following the invasion of Ukraine, gas prices were expected to breach the $4 mark sooner or later. The demand for oil is higher than ever, but oil companies are struggling to scale up production at the same rate. 
Stricter environmental rules also impact oil companies’ ability to produce oil, especially after they were temporarily scaled back at the onset of the COVID-19 pandemic.
 “Oil and gas companies do not want to drill more,” said analyst at Raymon James Pavel Molchanov to CNN. “They are under pressure from the financial community to pay more dividends, to do more share buybacks instead of the proverbial ‘drill baby drill,’ which is the way they would have done things 10 years ago. Corporate strategy has fundamentally changed.”
The US also struggles with having less refining capacity than in the past. Environmental rules are prompting higher standards for refineries as well, and rather than invest the money into revamping old refineries to keep them in operation, many companies are closing them in lieu of refineries opening overseas. 

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