Executive Summary 

• Switching from oil to renewable energy and electric vehicles does not get rid of resource dependency. It just changes what you depend on. Instead of relying on oil, countries end up relying on critical minerals such as lithium, rare earths, silver, polysilicon, and copper—and as China refines most of them, even minerals mined elsewhere often must go through China before they can be used.  

• For the U.S. specifically, this matters because it is trading a strength for a weakness. The U.S. is a major oil and gas producer, but it is far more dependent on foreign countries for minerals and especially for refining, so moving too fast could raise costs and create new security risks before it makes the country more independent.  

• Because the markets can answer most of the hard questions on their own, the government’s role should be limited, but it still needs to account for externalities the market ignores, mainly national security and climate change, which is why a mostly hands-off approach paired with targeted incentives makes the most sense. 

Introduction 

On May 18th, 2022, European Commission President Ursula von der Leyen launched the REPowerEU Plan, which was intended to make Europe independent from Russian fossil fuels as quickly as possible. Her argument was that Europe could not keep relying on a supplier it no longer trusted, and that the solution was to diversify its energy supply and speed up the shift to clean energy. While 2022 was the formal start of this plan, the shift toward renewable energy and electric vehicles (EV) had actually begun well before it. By the 2010s, the clean-energy transition was not just a political goal; it was also starting to make economic sense, as scale and innovation drove steep cost declines in solar, wind, and battery production. Over the decade, solar module prices fell by more than 80%, and average battery costs fell by roughly 90% since 2010. Then, pandemic-era recovery spending and the energy-security shock from Russia’s invasion of Ukraine turned the transition into an industrial race, with China controlling much of the clean-tech manufacturing and mineral-processing base while the United States and European Union scrambled to secure their own domestic capacity and access to critical raw materials.  

Going back to the reasoning behind the REPowerEU Plan, European countries have framed the switch to renewable energy and electric vehicles as a way to lower their resource dependency on Russia. More recently, with conflict in the Middle East, there has been growing debate over whether the U.S. should remain so reliant on foreign oil when a single conflict in the region can double gas prices for Americans. This paper analyzes whether switching away from oil actually removes that dependency or simply shifts it, and then weighs the pros and cons for the United States of staying with fossil fuels versus moving to renewables and EVs from a resource-dependency standpoint. 

Shifting dependency, not taking it away 

While moving away from oil takes away oil dependency, it does not reduce resource dependency. Instead, it shifts it. Switching to renewable energy and electric vehicles moves the dependency to critical minerals, which are broadly defined as those that are important for the functioning of modern technologies, economies, or national security, and are vulnerable to supply chain disruptions. This is first evident in the shift to electric vehicles. Running an electric vehicle requires a battery, and batteries require lithium, cobalt, nickel, graphite, and manganese to make. Additionally, the magnets that go into electric vehicle motors and wind turbines require neodymium, praseodymium, dysprosium, and terbium, all of which are rare earth minerals. 

China mines roughly 69% of these rare earth minerals, and more important, China processes around 91% of the world’s supply. These minerals are often mined in another country and then shipped to China for refining, and only then turned into finished material. Since rare earth minerals must be refined into usable form, the chokepoint is not the mining but the refining of them. 

Solar energy, the largest renewable source, brings its own dependencies. The first is polysilicon, the purified silicon that forms the cell. China produces roughly 93% of it, and a single province accounts for 40% of global supply. The second is silver, which carries the current. Because around 70% of silver is produced only as a by-product of other metals, supply cannot easily expand to meet solar’s soaring demand, and the market has run a structural deficit for years. China’s dominance extends to the finished product as well, with over 80% of the world’s solar panels produced there at every production stage. Copper is the connective tissue of the system, as it is needed for the motors, turbines, panels, and grids. Here mining concentration is not the main issue—refining is, as more than 45% of the world’s copper is refined in China. 

This dependency is made more serious because mineral supply cannot easily adapt to rising demand. New mines require years of exploration, permitting, financing, and construction before they produce usable supply. The International Energy Agency found that major mines coming online from 2010 to 2019 took over 16 years on average from discovery to first production, including more than 12 years for exploration and feasibility studies and another four to five years for construction. This presents a new element that policymakers will need to consider when determining whether switching to renewable energy and electric vehicles is the right decision. 

Source: Energy Institute, Statistical Review of World Energy 2026. Shares based on 2025 oil production (thousand barrels daily).

Source: U.S. Geological Survey. Mineral Commodity Summaries 2026. Reston, VA: U.S. Geological Survey, 2026. 

Source: J.P. Morgan Global Research, “Critical minerals outlook: surging demand, expanding supply chains,” February 23, 2026. 

A Pros Versus Cons Analysis of This Approach for the U.S. 

The case for the transition (U.S. perspective) 

The United States has an unusual starting point for analyzing the pros and cons of this transition. Unlike Europe and Japan, the U.S. is a major producer of both oil and natural gas. Since 2019 its total energy production has exceeded its consumption, so it holds a competitive advantage in the fuels that it would be moving away from. The case in support of the transition argues that this advantage does not cancel oil’s underlying weakness for America. Roughly 90% of U.S. transportation still runs on petroleum, which leaves the country exposed to prices set far beyond its borders by OPEC country decisions, wars, sanctions, and shipping disruptions. If the U.S. electrifies transport, the argument goes, energy could be drawn from a diversified portfolio that includes natural gas, nuclear, hydro, solar, and wind, rather than a single globally traded commodity. Supporters also point out that oil is a recurring cost, while switching to renewable energy is mostly an upfront one, since the minerals involved stay embedded in American-built cars, panels, and grid equipment rather than being burned away. Because of this, economists in favor of the transition argue that a price spike in a mineral-dependent system would not hit as hard as one in an oil-dependent system, and that its impact would instead be slower and more consistent. 

The case against the transition (U.S. perspective) 

The skeptical case answers that, for the U.S., this trades a national strength for a weakness. Compared to its position in oil, the U.S. is far more reliant on foreign minerals, depending on China as a major source for 14 of the 33 critical minerals it most needs to import. On top of this, because new U.S. mines and refineries take many years to permit and build while U.S. demand from EVs, grids, and data centers climbs quickly, a transition that outruns its own supply chains could raise costs for American consumers before it improves security. In 2025, the U.S. added copper, silver, and silicon to its official critical-minerals list, showing that the federal government now treats the very materials this shift depends on as national-security risks. 

Conclusion: A Free-Market Approach with Externality Considerations 

While a quantifiable answer to which approach is more economically beneficial is beyond the scope of this paper, there are a couple of principles the U.S. government should follow. The first is that a hands-off approach has real merit. If the government allows companies to act in their own best interests with the goal of maximizing profits, it forces each company to make the decision that is best for them. If a company would be better suited to oil, then it would choose oil, and if a company would be better off switching to renewables so it is not exposed to commodity price spikes, then it would switch. The same is true for consumers. If consumers believed that switching to electric vehicles would leave them better off financially, then demand would increase and the market for those vehicles would grow. The markets would answer many of these questions that are hard to answer, so what the government can do is limited. 

The main thing the government can do is try to align companies’ goals with its own through incentives. Incentives cannot make a company care about national security, but they can change what is profitable, so that the behavior the government wants becomes the behavior that maximizes profit. For example, if the government wants more domestic refining capacity, it can use subsidies, tax credits, or procurement contracts to make building that capacity in the U.S. the most profitable option for a company, rather than relying on the company to value national security on its own. 

The reason the government still has a role is that the market on its own does not account for certain externalities. The first is national security. Throughout history the U.S. government has intervened in countries that have stopped exports of oil, and this results in more spending of U.S. tax dollars and in injuries and fatalities to U.S. soldiers. Because individual companies do not pay these costs, the market on its own will not factor them in. 

Another externality is climate change. While analyzing the effect of carbon on climate change is beyond the scope of this paper, if an increase in carbon emissions does have a negative impact on the environment, then this is an externality the government would have to consider. One way to do this would be to impose a carbon tax, which would force companies to choose the energy option that produces the most profit under the new pricing. Given that renewables lead to fewer carbon emissions, that option could end up being renewable energy.