But as the conflict progresses, pressure has increased to obtain those same raw materials, to ensure continued production of everything from semiconductors to solar panels.
The result has been higher prices in raw materials markets and a possible shift towards new production sites where there is less geopolitical uncertainty, increasing the number of countries that can process minerals such as rare earths.
Shock of sulfur, helium and gasoline.
“The impact of the Gulf War is not only on the energy market, it has been impacting some byproducts from oil.“such as sulfur, helium and gasoline – stated Dario Liguti, Director of the Sustainable Energy Division of the UNECE.
They are all byproducts of petroleum refining and are used in a wide range of manufacturing applications, from fertilizers to insecticides, plastics and matches, as well as refrigeration and semiconductor production.
Naphtha is another byproduct of petroleum refining and a key component of the chemical industry.
“The first reaction – in addition, of course, to the increase in prices – will be for industries to reduce their use and, therefore, their production.…whether solar panels, magnets, batteries, etc., in the future,” said Mr. Liguti.
Before the war, 30 percent of the world’s sulfur production, used in metal processing, transited the Strait of Hormuz.
But that was when about 140 ships a day transited this important commercial waterway. Today, maritime transport is practically paralyzed, following attacks on ships and the current confrontation between Iran and the United States over the use of the strait.
If the conflict situation continues, shortages of key minerals “will become evident,” the UNECE official continued, forcing the industry to “reduce its production” of critical minerals used in renewable energy equipment and digital technology.
“So, over time, this will have an increasing impact on pricing, first… and then, secondly, the availability of that equipment.”
Today, industries that depended on supplies from the Strait of Hormuz “are using their existing stocks and are using reserves and are increasing production elsewhere”said Mr. Liguti.
Search for new suppliers
He highlighted a “drive by many Member States around the world to secure those minerals” that will result in countries increasingly building “strategic reserves… to avoid a similar disruption in the future.”
“So far, the situation is being felt in some regional markets, particularly in South and Southeast Asia, where there is a lot of refining and processing of these initial products. But over time, the geographic reach will be greater.”
In addition to the enormous human cost of the war, the UNECE official noted how the oil and natural gas crisis also threatens to undermine the global shift towards green energy sources.
“You can see how a crisis that is fundamentally focused on the old traditional fossil fuel sector, how that affects the new renewable energyand the transition we have been undertaking and we actually need to accelerate, as you know, as we are falling behind on the Paris 2030 goals.”.
ECE covers 56 Member States in Europe, North America and Asia; is making efforts to align critical raw materials with the UN Sustainable Development Goals.