Fluctuating prices will create chaotic chain reactions unless governments and businesses get to grips with a new world order defined by resource politics, says Resources Futures, a new report. Mutually destructive trade policies and an ever more unpredictable global environment will add to the cocktail of resource-related fears.
Resources Futures shows that in an interconnected world, volatile prices pose far greater threats than physical scarcities. Shocks reverberate across supply chains when communities protest in Peru, rainfall levels drop in the American Midwest, o r a flood hits Australia – often sending global resource markets into a tailspin.
As world leaders make limited progress in Doha, the report claims that grasping the politics of resources is a pre-condition for tackling major global challenges, such as climate change.
Resources Futures is based on analysis of 12 million data points from more than 200 countries and 1,200 types of natural resources. It finds that:
- Volatility of resource prices is the new normal, hitting both consumers and producers. Confronting volatile prices is effectively an insurance policy for the global economy. Investing in social and environmental improvements in new producer states in the developing world is not charity; it is a critical part of this insurance policy.
- Trade is becoming a frontline for conflicts over resources, at a time when the world is more dependent than ever on resources trade, which grew by 50% in the last ten years.
- Environmental change and degradation, especially water scarcity and climate change, is making business-as-usual practices obsolete and threatening the global production system.
To avoid sleepwalking into a prolonged era of resource-related strife, the report proposes:
- The formation of a 'coalition of the committed', or a new grouping of the world’s key resource producers and consumers – a ‘Resources 30’, or 'R30'. The coalition’s first task should be to tackle price shocks.
- Initiatives to improve transparency, manage interdependencies, and strengthen climate adaptation should be prioritized by donors in the coming wave of new producer countries. Their fast expanding resource sectors are potential flashpoints for social and political tensions.
- Expanding or linking the International Energy Agency’s emergency sharing mechanism to those in the emerging economies, especially China and India.
- Allowing companies crucial to fuel supply to access a percentage of national reserves without prior government approval, and tackle local disruptions before they hit international markets.
- Major biofuel-producing countries to collectively purchase options on grain and oilseed feedstocks from their biofuel industries. These would be triggered during food price spikes, acting as a virtual global food reserve.
Other key findings include:
- Volatile commodity markets are here to stay. The fundamental pressures that contributed to the resource crunch are expected to remain in place beyond 2020.
- Resource production is concentrated in eight countries: China, the US, Australia, the EU, Brazil, Russia, India and Indonesia.
- African countries are conspicuous by their absence from lists of major resource producers. Despite the hype about a ‘new scramble for Africa,’ many agricultural or resource-seeking investments remain speculative or have yet to commence production.
- China and India are at the epicentre of economic power and their resource suppliers, such as Brazil and Indonesia, are joining them as powerful global players. One in five tonnes of resources exported worldwide now goes to either China or India.
- Demand for resources has increased at unprecedented levels over the last ten years, and more growth is expected until at least 2030.
- By 2030 demand for steel is set to grow by 90%, copper by 60% and gas by 44%. As poorer countries become more affluent and population grows, demand for food, water and forest products will grow too.
Notes to Editors
Read Resources Futures
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