The top copper-producing country in the world is Chile by far, accounting for about 40 percent of all copper produced in the world.
Over the last three years in the country, electricity has risen by close to 400 percent; from 3.5 cents a kilowatt-hour to 35 cents a kilowatt-hour. That's like bread increasing from $2 a loaf to $20 a loaf.
The primary reason is the deal Chile made with Argentina to diversify how it generated electricity. The choice of piping in natural gas from Argentina was made, and in a short year-and-a-half, it became a disaster as Argentina broke their production contracts with Chile, choosing to redirect it to their own market.
As a result, Chile switched over to diesel, basically tripling the cost of generating electricity. A severe drought in the country has now made them more reliant on expensive diesel, increasing energy costs even more (less hydroelectric power).
The bottom line is it's having a strong impact on the copper market, as the cost of getting it out of the ground is increasing. That, along with China's continuous demand for copper, makes it look like it may go up in price for some time to come. It's definitely worth watching closely with these factors in mind.
From December 2007, the price has increased by 33 percent, standing at $3.95 a pound as of this writing. It could go much higher.
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