A new report released yesterday (10 December) by think tank Chatham House (the Royal Institute of International Affairs) paints a bleak outlook of the future of the world’s resources market, saying that due to the current period of ‘intensified resource stress’, we could soon be seeing supply disruptions, volatile prices and even political tensions arising over resource access.

The ‘Resources Futures’ report warns that due to the ‘scale and speed of demand growth’ from emerging economies, tight commodity markets and ‘poorly designed and short-sighted policies’, the ‘spectre of resource insecurity has come back with a vengeance’ and both governments and business should now be looking to focus on ‘resource politics’ to prepare for the future.

Written with the aim of exploring the ‘constraints and uncertainties’ faced globally over resource access (due to increasing population and resource scarcity), the report is based on ‘two years of extensive research on the shifting global political economy of key resources: land, water, energy, minerals and food, and their inter-linkages in production, use and trade’. It also outlines possible implications for future policies and political agendas.

Rising demand levels

Focusing on food, metals, oil and water, the report suggests that due to demand of ‘unprecedented levels’, which is expected to increase until ‘at least 2030’, the threat of political ‘overreactions or even militarised responses’ over resources could soon be a common occurrence.

Based on the report’s forecast, by 2030 demand for cereal crops could grow by 90 per cent (compared to 2010 levels), potentially rising up to 170 per cent with climate change.

Indeed, the report stipulates that in the case of food, the world is ‘only one or two bad harvests away from another global crisis’ while lower prices could trigger a ‘resource binge, especially in the large and growing developing countries’.

In the case of metals, demand for steel will grow by 90 per cent and copper by 60 per cent, whilst demand for energy will grow by 29 per cent.

Factors such as countries increasingly hoarding resources in a national reserve and raising taxes on exported goods, such as grain (to ensure produce remains in the country of origin), as well as ‘the shift in consumer power from West to East’, are ‘changing the rules of the resources game’, says the report.

‘The blindness of standard policy prescriptions to resource politics could worsen the future outlook and undermine sound economic choices’, it continues, suggesting that in order to ‘help ensure the world is equipped to move towards a new resource equilibrium under stress conditions’, it is ‘critical to manage perceptions, expectations and fears of resource scarcity in a collaborative manner’.

Key suggestions

One of the main methods which the report suggests could be used to tackle resource insecurity is through forming a "coalition of the committed", a global body made up of delegates from the 30 most resource driven countries (the ‘Resource 30’) to tackle ‘price shocks’ and ‘improve confidence and coordination in increasingly integrated global resource markets’.

Other suggestions include:

• Creating a virtual ‘global food reserve’ by arranging for ‘major grain-based and oilseed-based biofuel-producing countries’ to collectively purchase call options from their biofuel industries;
• Effecting greater transparency on metals production, trade and stockholding by collating stockholding figures from traders through an ‘escrow service’, which would be published in ‘aggregated form’;
• Introducing a system to enable fuel companies to access a percentage of national reserves in case of ‘force majeure’ without prior government approval;
• Establishing criteria (such as moratoria) to govern resource production or extraction in areas of ‘significant biodiversity or ecological sensitivity’;
• Releasing an annual ‘State of the World’s Resources’ report or an international resources data bank to ‘standardize the collection and sharing of data on resource endowments, stocks and trade figures’.

Read the ‘Resources Futures’ report.