Since the debut of the Chevrolet (NYSE:GM) Volt in January 2007, the Lithium battery has become the gold standard for modern electric cars. Unfortunately, Lithium poses problems similar to those associated with oil (NYSE:USO). While a much “cleaner” solution, Lithium exists in finite supply and the countries with plentiful Lithium reserves would make less than ideal trading partners.
According to researchers at the Argonne National Laboratory, worldwide demand will not exceed 8 million tons, well within the recoverable 12 million tons of reserves estimated by the U.S. Geological Survey. The issue has more to do with our rising demand for electric vehicles. In 2009, worldwide Lithium production reached 120,000 tons. If electric cars achieve a 5% penetration rate by 2020, 60,000 tons of Lithium will be needed to fill the demand.
Currently, 80% of the world’s reserves are located in South American (NYSE:ILF) countries including Chile (NYSE:ECH), Argentina and the Bolivian Andes. While Chile and Argentina are eager to export, Bolivian president Evo Morales has voiced his disdain for the United States, using the phrase “Death to the Yankees” as a rallying cry to conclude his speeches. Morales is also a close associate of Venezuela’s Hugo Chavez and Iranian president Mahmoud Ahmadinejad.
Next to Bolivia and Chile, China (NYSE:FXI) possesses the most substantial Lithium reserves. Considering their tendency to restrict the export of rare earth metals in order to inflate prices, dependence on China’s Lithium supply would place the U.S. in a precarious position.
Rather than entrusting our Lithium needs to a country such a Bolivia, the United States must discover new reserves closer to home or develop a superior energy solution.