Abstract
Raw material criticality has played an important role in geostrategic thinking, especially since the crisis surrounding the price and supply of rare earths at the beginning of the 2010s. However, once dependency and strategic importance grow too strong, substitution efforts will take place that could reduce or even eradicate the previous criticality. Critical resources rarely become obsolete very quickly. However, this could happen in the case of crude oil because climate policy is forcing defossilisation, but also because artificial scarcity is falling as a result of geostrategic rivalries that are causing oversupply. This article analyses this process and the possible consequences using Saudi Arabia as an example. The development of a green hydrogen industry has potential, but it should not be overestimated in view of the absorption capacity of the economy.
Highlights
Raw material criticality has played an important role in geostrategic thinking, especially since the crisis surrounding the price and supply of rare earths at the beginning of the 2010s
Critical resources rarely become obsolete very quickly. This could happen in the case of crude oil because climate policy is forcing defossilisation, and because artificial scarcity is falling as a result of geostrategic rivalries that are causing oversupply
The two oil price crises in the 1970s as well as skyrocketing prices of rare earths ten years ago have revealed the dependence of the developed world on certain critical raw materials
Summary
The Loss of Raw Material Criticality: Implications of the Collapse of Saudi Arabian Oil Exports. Resource-rich countries, overwhelmed by income from resource sales, have three options that are listed here in decreasing order of economic efficiency: (i) forced investment strategies that use income for modernising the economy in an attempt to prepare the country for a period in which income from resources falls, but which may overstress the adaptation capacities of societies; (ii) investment in funds in preparation for periods of declining sales; (iii) domestic use, which in most cases overstresses the absorption capacities of national economies and leads to price hikes in local goods, endogenous deindustrialisation and a revaluation of the currency, reducing national competitiveness. Development of crude oil prices, 1900-2018 in constant 2018 US dollars per barrel
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