There Is No "Next Economy"

If we ruin this one, well, then that was it

After it there is nothing but air. Image via Unsplash

The largest energy crisis in human history has exposed the extractive, wholly unsustainable nature of the Western / Chinese industrial ecosystem. Mining used to happen in poor global south countries using cheap oil, while metallization and part manufacturing was increasingly done in China, using cheap coal. Final product assembly then took place either in China, or somewhere closer to the market, where labor was cheap and easy to exploit. With the Iran war depriving the global south and the mining colony, Australia, of its energy (primarily diesel fuel) the whole extractive industrial ecosystem has come under threat. Bad news is, that there is no next economy: so called “renewables” and batteries use the same raw materials and rely on the same processes as the old, fossil fuel economy. If anything the new, electrified economy has become even more reliant on oil than its “predecessor” ever was. No oil, no green energy either.

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There is no energy transition, no electrification, no green economy. It was all a ruse. A comfortable lie we told ourselves in case we were running out of oil, or had to stop using it to prevent climate change. Now, with a war raging on in the most energy rich part of the world, rapidly worsening energy returns on investment elsewhere, mining and agriculture’s oil dependence being exposed and mineral depletion taking its toll on the industry, it’s virtually guaranteed that there won’t be any transition towards a technological utopia in the future either.

Let’s take the cherished electric vehicle as an example. It should reduce oil demand, right? Wrong. Without oil not a single component of this pinnacle of technology could be produced. Thus a reduction in oil production could not possibly lead to the widespread adaption of “new energy vehicles”—quite the opposite. Let’s start with what electric cars are made out of. EVs contain 66 kg graphite, 53 kg copper, 40 kg nickel, 24 kg manganese, 13 kg cobalt, 9 kg lithium and .5 kg rare earths elements. None, I repeat, none of these metals could be mined, delivered, refined, then shaped into parts without fossil fuels. Not now, not next year, nor ever.

Mining shovels and trucks extracting the ore consume diesel fuel by the gallon, a minute. Bulk carrier ships burn bunker fuel by the ton on their journey from a mine in Chile or Australia to China on the other side of the planet. Trucks, trains, barges delivering the ore to a smelter also need untold amounts of diesel fuel to operate. Smelters burn natural gas, coal, or use electricity made with coal. Intermittent power from solar panels won’t cut it. The amount of work carried out by these engines and the scale of material transformation happening inside these factories simply do not allow for electrification to take place at scale.

Take a look at what’s happening in the aluminum industry, for example. Aluminum, beside being a cheap raw material for cans, is also a prime structural material to electric vehicles. Used as alloys both in battery and chassis manufacturing saves weight and extends range due to its light weight and high strength. The process, through which it’s made is as follows: mined bauxite (the ore from which aluminum is made) → alumina (or aluminum-oxide: Al2O3), made using the Bayer process (caustic soda/heat) → pure aluminum ingots via electrolysis → making alloys (mixing in other metals, such as Magnesium) → casting, sheet metal forming, etc. → finished product or part. Now, as it happens, 26% of all bauxite mined on the planet is produced in Australia. A continent sized country now struggling with a massive fuel crisis induced by a lack of oil transiting the Strait of Hormuz and being refined in Asian refineries. Should this little crisis last a few months longer, it’s not hard to imagine how the government down under would be pressed to prioritize diesel fuel for agriculture and food transportation purposes, as opposed to mining ores. Oops, there goes a quarter of world aluminum supply, without which there are no more cheap frames for solar panels, or molded components for electric cars and their batteries.

Australia is not only exporting raw bauxite, but processed alumina as well, from which smelters (elsewhere) can make pure aluminum directly. And why not in Australia? Well, beyond not having enough domestic diesel supply, Australia is not having enough locally produced electricity either. And I mean stable, dispatchable baseload electricity, not fluctuating current from solar panels and wind turbines. You see it takes a lot of energy to convert alumina into pure aluminum, this is why smelters are located in places where fossil fuels are cheap—dirt cheap. Like in China. And while Australia has coal, too, somehow they managed to convince themselves that it’s a much better idea to ship that fuel four thousand nautical miles (~8000 km) north¹ into China and burn it there.²

The other ideal location to make aluminum, where energy from fossil fuels is plentiful and cheap, is… Drum roll… The Middle East. Oh no! In response to attacks on its steel plants back in March, Iran has struck two major aluminum production sites in the Middle East. Beside not being able to export their products through the Strait, their production capacities, too, have been hit. Emirates Global Aluminium, the region’s top producer, reported significant damage at its Abu Dhabi facility, while Aluminium Bahrain (Alba) said it was assessing the extent of the damage to its plant. Earlier in March, Alba had already shut down 19% of its 1.6 million ton annual capacity due to shipping disruptions in the Strait of Hormuz. The Middle East accounts for 8-9% of global supply, thus the war raises the risk of a more acute supply squeeze.

Source: Kpler

But, wait, there is more! Australian bauxite is also a prime ore to extract Gallium from as a byproduct of making aluminum. Gallium is an essential metal for many electric components and semiconductors (including solar panel cells) as well as parts built into radar stations, missiles and fighter jets. Now, since 98% of this metal is refined in China (a prime customer of Australian bauxite), a diesel crisis in the world’s largest producer of this ore means an imminent Gallium crisis as well. Oops, there goes another chunk of the electrified economy—not to mention the metal’s military use… Is a total ban on exports coming? Well, we shall find out soon.

And it’s not just aluminum or gallium, but materials as simple as iron and steel as well, also used in electric cars. Iran and Bahrain together accounted for roughly 18% of global seaborne iron pellet exports in 2025, and shipments from both producers are now at risk or have been taken out already. (Iran shared the second rank globally in the production of direct reduced iron and strontium in 2022.) China is also indirectly affected, as its pellet imports from the Middle East and its steel exports to the region will both decline. Yet another second order effect of closing the Strait of Hormuz.

Graphite is yet another material which most people do not know where it comes from, although it can be found in almost all lithium batteries from phones to EVs. In fact, 66 kg of it is needed to build just one electric car. And while some of it is mined, reserves with the right purity and physical properties are hard to find—so it is manufactured instead. The vast majority (86% in 2024) of ultra high purity graphite was synthetically made, requiring a massive industrial footprint of fossil fuel feedstock and staggering amounts of electricity for high-heat furnaces. In fact the raw material for making graphite is a byproduct of the oil refining process, specifically needle coke. Yes, one of the most vital components in a battery is literally baked oil, made in furnaces at temperatures exceeding 3,000°C for weeks at a time. I guess, I don’t have to explain at this point, where that coke is coming from, or how the closure of the Strait of Hormuz affects its availability. (Hint: not in a good way.)

Needle coke, characterized by its needle-like structure, low thermal expansion, and high electrical conductivity. Image credit: EastCarbon

Lithium, the primary charge carrier in lithium-ion batteries, is also severely affected by the lack of fuel in Australia, as 49% of all lithium mined on the entire planet comes from there. Due to the inadequate supply of diesel fuel, the battery metal mining industry is also having to face disruptions. “Hard-rock lithium mining is likely to face fuel pressures,” Thomas Kavanagh from Argus Media explains, as “some of the largest lithium operations in the world, such as Greenbushes, Pilgangoora and Mt Marion, rely heavily on diesel for haulage, drilling and remote-site logistics, while electricity is primarily used for crushing, grinding and concentration.” So much for cheap EV-s.

And yet, we still haven’t reached the bottom of the list yet. There is more! Copper and silver production were already in a pretty bad shape before the war has started. (Click through the links to read a full analysis on these two metals.) In a nutshell: the IEA expected global mined copper supply to peak later this decade (at around 24 million tons) before falling noticeably to less than 19 million tons by 2035, as ore grades decline, reserves become depleted and mines are retired. Silver, 27% of which is a byproduct of copper mining, shares the same fate: declining ore grades, reserves becoming depleted and mines being retired. Mine output worldwide peaked in 2016 and global silver production was already projected to decline at an average rate of -0.9% year after year. That is, both metals were on their deathbeds already. Who could’ve thought that you cannot expand production forever on a finite planet…?

Now enter the Hormuz-crisis choking off not only fuel, but sulfur supplies as well. Up until March, 2026 much of this yellow material was obtained by refining high-sulfur (sour) crude oil so abundant in the Persian Gulf. As much as 50 to 70 percent of sulfur produced on planet Earth used to come from Saudi Arabia, with much of it is turned into sulfuric acid by China, who then exported it into Chile (a top importer) so that it can be used in leaching copper ore and making copper concentrate.³ (Which is then exported to China, where it is refined into pure copper and used in manufacturing everything electric.) We will now have to wait and see how long existing sulfur inventories last, and when they run out, how fast copper and a range of other material shortages take to develop... So much for peak copper production “later this decade.” If the crisis persists, global peak copper will happen this year already. And since mines themselves aren’t getting younger, once they are closed due to a lack of sulfuric acid, they won’t be reopened anytime soon.

Copper mine. Image via Unsplash

As you can see from the above, fossil fuels are not essential in transportation or generating electricity only, but in making just about anything: from cheap plastics (a derivative of oil) to ultra-high purity graphite, or from sulfuric acid to diesel fuel. The 20% loss of world supply is thus not just an issue of price, forcing people to commute less or pay more at the pump, but a body blow to the entire materials based supply chain from copper mines in Chile or bauxite mines in Australia, to international shipping, manufacturing and delivery. And that supply chain includes everything: from food to computers, or from solar panels to electric vehicles.

There is no energy transition, no electrification, no green economy. There is no “next economy” waiting in the wings either. There is just one economy: this one. And when it falters—either due to mineral depletion and peak production, or ecological disaster, perhaps due to climate change, or in this case war—that will be it. The ultimate risk the US-Israel coalition ran by starting a war on Iran was not one temporary shortage, nor a recession, or an increase in geopolitical premiums. It was the risk of starting a highly uneven, cascading collapse of an integrated commercial world order into a drastically simplified, shrinking shadow of a once globalized economy.

Until next time,

B

Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.

1. Japan also plans to buy Australian coal to replace scarce and expensive LNG cargoes. Remember, about half of coal’s delivered cost came from diesel, already before the war. With diesel prices surging, could coal mining still remain profitable? And what if there isn’t physically enough diesel to mine, nor marine bunker fuel to deliver it…?

2. Reasons for shipping Australian coal to China include: cheap(er) labor, high competition, a lack of “trouble” from trade unions and climate considerations. (If that coal is burned elsewhere, it doesn’t affect Australian climate, right? Just kidding.) Besides, what remains of the continent’s aluminum industry was failing in 2020 already, with all smelter operators losing money and considering closure.

3. Sulfuric acid is not only used in mining, it is also essential to the manufacturing of just about everything from lead-acid batteries to pharmaceuticals, catalysts and degreasers. It’s no exaggeration to say that without sulfuric acid, industrial life stops.