The New Resource Curse
The critical minerals era is expected to unleash economic and geopolitical volatility, with demand for lithium, cobalt, and rare earths surging by 30%, 6-8%, and more than tripling in price since 2020, respectively. The International Energy Agency expects demand for lithium to be five times as large by 2040, raising the prospect of a new round of resource curses in countries lacking institutions to manage sudden mineral wealth.
The war between Israel and the United States against Iran has sent oil prices skyrocketing to $106 a barrel. This incident is part of a long history of oil-related instability, but the emerging critical minerals era is expected to bring even greater turbulence. Demand for critical minerals such as lithium, cobalt, and rare earths is surging, with the International Energy Agency expecting demand for lithium to be five times as large by 2040. The risks associated with the oil era, including elite capture and Dutch disease, are likely to recur in countries lacking strong institutions. However, the critical minerals era presents new and broader uncertainties, including structural, geopolitical, technological, and institutional challenges. No country is prepared to contend with these challenges.
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