Inbound Logistics | June 2021

Energy, Oil &Gas

MINERAL SUPPLY CHAIN IN CRITICAL CONDITION Prompted by the global chip shortage, President Biden signed an executive order for a 100-day reviewof supply chains for critical materials, including for semiconductors, large-capacity batteries, and rare-earth elements. The United States—which is 100%reliant on imported rare-earth elements—and itsWestern allies are behind, while China built its rare-earth supply chain decades ago, says a U.S. News report. China controls about 80%of theworld’s rare-earth production capacity, 43%of exports, and nearly 90%of refining, whichmeans theworld sells China low-value “TO REMAIN A LEADER IN THE ENERGY AND AUTOMOTIVE AREAS, THE UNITED STATES MUST SECURE ADEQUATE SUPPLIES OF THE METALS NECESSARY TO POWER THE 21st CENTURY’S INDUSTRIAL REVOLUTION.” — Brian Menell, Chairman and CEO, TechMet


President Biden recently approved the Vineyard Wind project—the first major U.S. offshore wind farm—off the coast of Massachusetts. The project, which would generate up to 800 megawatts of electricity from 62 giant wind turbines, is expected to produce enough electricity to power 400,000 businesses and homes in New England by 2023, while reducing carbon emissions by more than 1.6 million tons per year. Boston-based General Electric will manufacture the massive Vineyard Wind turbines, which will send electricity along underwater cables to the regional power grid near Hyannis. Even though GE will manufacture the major components in Europe, as many as 2,000 workers will be employed locally during the project’s construction and dozens more will work in maintenance and operations after the wind farm is complete. Representatives of the fishing industry continue to criticize the Vineyard Wind project, claiming that the giant wind turbines will disrupt their fishing grounds and create navigational hazards to their boats, even though the plan calls for spacing them one mile apart. The decision to approve the Vineyard Wind project is an important milestone in the Biden administration’s effort to battle climate change by moving the nation’s energy policy away from fossil fuels and toward cleaner, renewable sources. The administration plans to install 30 gigawatts of offshore wind power capacity—the equivalent of more than 36 additional wind farms of Vineyard Wind’s size—in U.S. waters by 2030. More than 2,000 turbines will be needed to meet that target.

ore concentrate and China sells high-value end products. The United Statesmust make the supply of critical minerals a key part of its domestic and foreign policy to get in the game, the report says. Although there is strong opposition to these environmentally challengingmining practices, it is possible that U.S. companies canmine and process critical materials with much lower environmental impacts than China can, the report says.

OIL SPOUTS TO A TWO-YEAR HIGH Oil prices surged to $72 per barrel for the first time in two years in June 2021, exacerbating high transportation and shipping costs for businesses navigating rawmaterials shortages, crowded ports, and increased consumer demand. The trends in oil prices show:

• Brent , the global crude oil benchmark, sank below $20 per barrel in April as lockdowns dried up demand for airlines and manufacturers, but shot up to $71.48 per barrel in June, its highest since January 2020. • The deep freeze in Texas and the Colonial Pipeline cyberattack tightened the market for fuel, while increased demand and the fast pace of vaccinations in the United States boosted oil prices. • Up to 25% of tank trucks are parked around the country because there aren’t enough qualified drivers, a 15% increase

from the beginning of summer 2020, compounding fuel shortages and rising costs. • When demand for truck drivers sank during the pandemic, drivers sought other jobs, drying up the pipeline for new drivers once economies opened back up. • High oil prices partly stem from the Organization of the Petroleum Exporting Countries and its allies’ decision to continue to gradually restore supply. • As supplies increase and the global economy normalizes, demand and prices could ease.

16 Inbound Logistics • June 2021

Powered by