Global Energy Security

What does the term energy security mean?

In simple terms, energy security is defined by the International Energy Agency as the secure and affordable supply of energy. In recent years, the challenge of climate change has resulted in the concept being refined to be ‘the provision of reasonably priced, reliable and environmentally-friendly energy’. Thus, to provide energy security is to ensure the reliable supply of energy services to consumers at a price that they can afford and in a way that does not damage the environment. This view of energy security focuses on the interests of energy importing states as the emphasis is upon security of supply and affordability. Energy-exporting states tend to emphasise security of demand. They want to ensure that they receive a fair price for their energy exports and that there will be sufficient future demand to justify investment in expensive energy projects. Thus, there is a clear difference between the interests of energy importing economies and the demands of energy exporting economies.

Why do we need energy security?

Try and imagine a world without secure and reliable supplies of energy? In the UK we take it for granted that when you turn on the switch the light goes on. Many parts of the world do not have that certainty and more than 1.6 billion people currently live without access to electricity. In the summer of 2008 the oil price peaked at $147 a barrel. At that time, the impact of high-energy prices made everyone realise just how dependent upon energy services our society has become. Those record high oil prices played a role in the global economic crisis that has followed. As people had to pay more for petrol, heating oil and gas and electricity, they had less to spend on other things, which depressed consumer demand. At the same time, high fuel costs were passed on to the price of the food that we eat and the goods that we buy. They also increased the cost of our summer holidays in the form of fuel surcharges. They also resulted in billions of dollars being transferred from the energy importing economies to the energy exporting economies. And our reliance on oil and gas goes beyond the obvious supply of lighting, heating, cooling, transportation and so on; these hydrocarbons are also essential raw materials for manufacturing. Almost everything that you consume is one way or another dependent on access to hydrocarbons. As a society, we are hooked on oil. As Matthew Yeomans put it in his book Oil: A Concise Guide to the Most Important Product on Earth: From the moment we wake up in the morning to the moment we go to sleep, oil controls our lives. This means that anything that disrupts the supply of oil and gas, or makes it more expensive, is a threat to our way of life.

What are the main concerns facing the future of energy?

Our current energy system is based primarily on hydrocarbons or fossil fuels: coal, oil and gas. At present, these three fuels account for 80.9% of primary energy supply and the International Energy Agency (IEA) estimates that they will still account for 80% of fuels in 2030. These are finite non-renewable resources that are only found in particular parts of the world. Thus, it is geology that determines the energy resource base, that is the total amount of coal, oil and gas reserves that are in existence on the planet. However, all of the resource base is not available for us to exploit, much of it remains undiscovered and of that we know to exist, not all of it can be developed under existing economic conditions and with current technology. What we call proven reserves, which can be defined as: those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions. This means that at any moment in time there is a physical limit to how much oil, or gas or coal can be produced. In reality, increasingly it is not these ‘below the ground’ geological factors that limit energy production and threaten energy security; but rather the above the ground’ geopolitical, economic and environmental factors that limit production. That said, hydrocarbons are non-renewable and there is increasing support for the view that we will soon hit the maximum level of oil production, or Peak Oil. The concern is not so much that we will hit peak production, but what happens after that? Will production plateau or will there be a rapid decline in production? We don’t know the answer, but there may soon be a physical limit to the amount of oil and gas, and even coal, available to meet our energy demands.

There is considerable disagreement about Peak Oil, but it is widely accepted that there are a host of above the ground problems that threaten the secure and affordable supply of energy and that we have reached the end of easy oil. Our contemporary reliance on hydrocarbons is the result of the industrial revolution, which harnessed the energy in coal to drive machinery. In its initial phase, industrial society was dependent upon local supplies of coal. It was only when oil became an energy source at the turn of the 20th century that international trade in energy became a major factor. Some industrial economies, principally, the United States, had domestic access to the oil; others, such as the European powers, had to develop the capacity to develop oil abroad and transport it home. After the Second World War the economics and geopolitics of oil and gas production have changed dramatically. The major oil-exporting regions of the world, first and foremost the Middle East, are no longer the subject of European colonialism and are no longer under the control of the International Oil Companies. Instead, the oil rich regions are now under the control of independent states with their own national oil companies. In the case of oil, these oil rich states have created a cartel, the Organisation of Petroleum Exporting Countries or OPEC, to protect their interests. Most recently, the collapse of the Soviet Union has resulted in the emergence of new oil and gas exporting states, such as Russia, Azerbaijan, Kazakhstan, and Uzbekistan. Equally, there are now major oil exporting states in Africa--Nigeria, Sudan, Angola—and Latin America—Brazil, Columbia, Ecuador and Venezuela. Many of these states have created their own national oil companies and are driving a hard bargain when it comes to allowing the international oil companies access to their reserves, a trend that energy importing states in the developed world term ‘resource nationalism’. The key point here is that there has been a global shift in the geography of oil and gas production, away from the industrially developed north towards the so-called developing world. In fact, according to BP’s 2009 Statistical Review of World Energy, 2008 was the first year when energy consumption in the developing world was greater than the developed world. Equally, there has been a shift away from the international oil companies—such as BP, Chevron, ExxonMobil, Shell and Total--as the holders of oil reserves and the main producers of oil, towards national oil companies, such as Saudi Aramco, Petronas (Malaysia), and Petrobas (Brazil). Today, national oil companies control about 77% of the world’s oil reserves and the international oil companies less than 10%.

Not only has there been a global shift in production, there are also new centres of demand in the developing world—such as India and China—that are changing the geography of demand, in 2008 China alone accounted for nearly three-quarters of global growth in energy consumption. It is now recognised that the majority of the future growth in energy demand will come from the developing world, which continues to experience rapid rates of population growth, urbanisation and economic growth. The IEA predicts that between now and 2030 the developing world will account for 87% of the growth in global energy demand. All of this means that there are more states and consumers chasing a limited amount of energy production.

If the situation were not complicated enough, it is now apparent that the burning of fossil fuels since the advent of the industrial revolution has released large amounts of carbon dioxide (CO2) into the atmosphere and the resultant increase in concentrations of  CO2 is leading to a warming of the climate, so-called climate change. The vast majority of the World’s scientific community and its politicians now accept that measures must be taken to stabilise the levels of CO2 to minimise the impact of global warming. It is estimated that energy-related CO2emissions account for more then 61% of global greenhouse gas emissions. Consequently, to address climate change, energy strategies and climate change policies need to be closely coordinated. The UK Government’s Energy Strategy identifies energy security and climate change as major challenges facing the UK, and the recent Climate Change Act sets strict emission targets for the energy sector and a carbon budget for the country. This complicates the energy security situation as it means that emphasis must now be placed on sources of energy that do not generate large amounts of CO2. This means, gas, rather than oil and oil rather than coal, and renewable energy and possibly nuclear power rather than fossil fuels. But coal is more plentiful and fossil fuels are cheaper, at present, than renewable energy and nuclear power. There are hopes that a technology known as carbon capture and storage (CCS) can be developed to produce so-called ‘clean coal’, but it remains unproven. Thus, it’s far from certain whether it will be possible to deliver energy services in a way that is reliable and affordable and that will not damage the environment.

What would happen if we did nothing to protect our energy supplies and continued to use it at the current rate?

In their 2008 World Outlook, the International Energy Agency concluded that: ‘The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable—environmentally, economically, socially.’ Put simply, ‘business as usual’ is not an option. If we continue to rely on fossil fuels and continue to consume them at ever-increasing rates, well before we run out of reserves, we will pay more and more for our energy, which will trigger economic collapse, social unrest and conflict. However, such a future could also trigger catastrophic climate change that would also bring about the same negative results. Therefore, something has to change; we need to change to way we obtain our energy services to reduce our reliance on non-renewable fossil fuels and to avoid catastrophic climate change. However, the energy revolution that we need will be expensive, but the cost will be even higher if we delay. Many are now calling for a Green New Deal or a Green Recovery Plan that would target government funding on projects that will promote the transition to a low carbon future.

Who are the key players involved with energy security?

One of the problems facing us is that there is no international organisation responsible for coordinating global energy policies. The interests of the energy importing developed world are represented by the International Energy Agency, which was created by the OECD (Organisation for Economic Co-operation and Development) in 1974 as a result the actions of OPEC, and which represents the interests of some oil exporting states oil. The European Union has an energy strategy, but energy security is the responsibility of the 27 member states. There is an Energy Charter Treaty that aims: “to strengthen the rule of law on energy issues, by creating a level playing field of rules to be observed by all participating governments, thereby mitigating risks associated with energy-related investment and trade.” But membership is voluntary and it has no real powers. The World Trade Organization is not involved in the energy sector.

In the absence of an effective international organization, energy security is the business of individual states and their state and privately owned energy companies. In some countries the state owns the energy companies and energy infrastructure and in others there is a mixture of state-owned, state-controlled and private companies. The UK is unusual in that the Government no longer owns any of our energy sector, yet it still sees energy security as something it needs to deliver.

The global energy system that enables the production, trade, transportation and delivery of energy resources and services is very complex. In the oil industry there is a global market for crude oil and oil products and supply and demand are matched via that market, though a lot of oil is now subject to longer-term contracts. In the gas industry, which is dependent upon pipelines and liquefied natural gas that requires lots of capital investment, long-term contracts are the norm. Traditionally, the gas market has been segmented into regional markets in Europe, Asia and North America, though there is a trend toward globalization and the creation of a single gas market.

Are there current conflicts over energy security?

Many would argue that the continuing instability in the Middle East is a direct result of the fact that it is the world’s most important oil producing region. Because of their reliance on imported oil, the US and its allies, have a vested interest in ensuring the supply of Middle Eastern oil to world markets. Any developments in the region that threaten US interests are seen as a direct threat to US security (this is known as the Carter Doctrine after US President Jimmy Carter). In 1990-91 when Saddam Hussein invaded Kuwait the US led a military coalition that defeated him, had he succeed Iraq would have controlled 20 percent of OPEC oil production and 20 of global oil reserves. The current conflict in Iraq was triggered by different concerns and both President Bush and then Prime Minister Blair denied that it had anything to do with oil, but many maintain that it’s ‘all about oil.’ More generally, there is a school of thought that oil is to cause of many conflicts around the world today (see, for example, a recent book by Michael Klare: Rising Powers: Shrinking Planet: The New Geopolitics of Energy). There is an unhappy coincidence between oil wealth and conflict. This is part of the so-called resource curse and civil war and unrest in oil exporting states such as Iraq, Nigeria and Sudan add to concerns about global energy security. Conflict over gas is less common, but geopolitics often gets in the way of developing gas fields and building transcontinental pipelines. The recent gas dispute between Russia and Ukraine is about the price of gas and the ability of the Ukraine to pay for its gas. But it also has geopolitical undertones as Ukraine maintains that it is being punished by Moscow for being too pro-western. As 80% of the Russian gas that is delivered to Europe passes through Ukraine, disagreement between the two states threatens the security of European gas supply. This has led Russia to start building pipelines that will bypass Ukraine the EU to look for alternative sources of gas supply.

Do you foresee conflicts in the future and where and why, do you think these will happen?

Many analysts predict that as fossil fuels become scarcer there will be more ‘resource wars’. It is certainly clear, for example, that the US military is preparing itself to engage in military action to secure supplies of industrial resources, this is Michael Klare’s argument. Equally, NATO is considering whether it has a role to play in guaranteeing energy security. This may be more to do with protecting vulnerable energy installations from terrorist attack and deterring piracy in international sea-lanes. Actual military intervention to secure access to oil and gas fields is unlikely. Ironically, the current Iraqi war has deprived international oil markets of substantial amounts of Iraqi oil, thereby undermining global energy security. Conflicts in oil producing states seem set to continue, the situation in Nigeria shows little sign of improvement, and ‘resource nationalism’ is here to stay. We could define resource nationalism as: ‘efforts by resource-rich nations to shift political and economic control of their energy and mining sectors from foreign and private interests to domestic and state-controlled companies.’ Recently, we have seen such trends in countries such as Russia and Venezuela. Thus, there is greater need for energy importing states to engage in energy diplomacy and to promote dialog with energy exporting states. In the final analysis, if climate change alone were not enough to persuade us that our current energy system is unsustainable, the current geopolitical and economic problems associated with our hydrocarbon economy are sufficient to demand that we reduce our addiction to fossil fuels and seek alternatives.

What do we need to do to achieve global energy security?

First and foremost, we need to establish a dialog between energy importing and energy exporting states. Both have an interest in stable prices and secure supply and demand. The recent experience of record high prices, followed by an unprecedented slump is in nobody’s’ interest. It may be that negotiations around climate change policy, where there is a recognised need for a global solution, may spin off into related discussions around energy security. The exchange of energy technology to reduce carbon emissions is essential for climate change mitigation and may promote further cooperation.

Which countries are good models for implementing energy security?

Difficult to say as each country faces a unique set of circumstances in terms of indigenous energy supplies, the domestic energy mix (that is the share of different energy sources in domestic energy consumption), the scale of reliance upon energy imports and the nature of those energy imports. Until recently, the UK has been self sufficient in energy supply and energy security has not been a high priority, Japan, by comparison, lacks substantial domestic sources of supply and is almost totally reliant on imports of oil and gas and coal. To manage this situation it has pursued a policy of ‘multiple sourcing’ whereby it imports energy from a variety of different suppliers, thus avoiding over-reliance on any one source and also enabling it to play one off against the other to ensure a good price for its imports. Within the EU each member state faces its own set of energy security challenges and solution. France, for example, has decided to rely on nuclear power for over 60 percent of its electricity generation. The states of Central Europe have inherited a high degree of dependence on imported Russian gas. Countries like Denmark and Germany are aggressively developing renewable sources like wind power. It is a general rule of thumb that when it comes to energy, security lies in diversity. Diversity in terms of sources of imports of a particular energy resource and diversity in terms of reliance on a range of energy sources in your national energy mix. In most developed industrial economies there has been a trend away from coal and oil in electricity generation, in favour of natural gas. This is because of the geopolitical concerns attached to oil and the environmental problems associated with coal. However, in Europe at least, there are now concerns about future supplies of gas. In the past, a single energy resource, coal, dominated the energy mix of industrial economies. Today most economies have a diverse energy mix and a desire to increase the share of renewable energy and, in some cases, nuclear power. In China, though, coal still accounts of 70 percent of the energy mix.

What is the UK doing to protect our energy supplies?

Until recently, not enough, but the decline of our coal industry and the peaking of North Sea oil and gas production have provided a major wake up call. North Sea oil production peaked in 1999 and gas in 2000. Today the UK is a net energy importer and our level of energy import dependence is set to increase considerably in the near term. The Government estimates that by 2020 the UK could have to import three-quarters of its energy needs. At the same time, since 1989 both conservative and labour government have embarked on a policy of privatisation and liberalisation of our energy industry, the net result is that it is now entirely in private hands. The government believes that a competitive energy market will deliver secure and affordable energy. However, history suggests that this is somewhat naïve. The UK now needs to invest more in energy diplomacy and get more involved in EU and international energy strategy. This is particularly important as the UK government wishes to be a world leader in climate policy and has set the ambitious target of reducing CO2 by 80% by 2050. The Government’s energy and climate strategies are full of good intentions, but it remains to be seen if private companies and the market can be relied on to deliver the energy revolution that is required. Most of our coal-fired and nuclear power stations will have to be replaced in the next decade (by 2025 all but one of our current nuclear power stations will be out of service) and we will have to find new sources of supplies of oil and gas. This presents a major opportunity. The Government seems to be basing its strategy on a new generation of nuclear power stations and the possibility of clean coal, plus a substantial expansion of wind energy; but if the wrong decisions are made now it will lock in those mistakes for 30 to 40 years.

Does the UK have a good energy security model in place?

Following on from what I have said above, I would say the government has lots of good intentions and lots of ambitious targets in relation to the growth of renewable energy, improvements in energy efficiency and reduction in CO2 emissions; but it remains unclear how the targets will be achieved. The current government believes that it can create the necessary regulatory framework to deliver secure, affordable and clean energy. The problem is that the private sector is driven by profit and shareholder interests, not government policy. That said, already, electricity generators are required by law to source a percentage of their electricity from renewable sources (the so-called ‘Renewables Obligation’), but, in the current recession, many investors are pulling out of renewable energy projects because they no longer consider them a good investment. What the politicians are not prepared to admit is that to deliver energy security and to achieve our climate change targets we will inevitably have to pay more for our energy and that we will also have to change our lifestyles. So, the answer to the question might be that we have an evolving vision of our energy future, but how we might achieve it is still work in progress.

Who is responsible for protecting our energy demands?

In the UK the government clearly sees energy security as an area of its responsibility, but, as explained above, it no longer owns or controls the energy industry, its role is to regulate. Last year it created a new ministry the Department of Energy and Climate Change to implement its new policies. But the fact is that our energy industry is in the hands of private companies, many of which are not UK-based. The UK government recently sold it interest in British Nuclear Energy to the government owned French company EDF. So there is no straightforward answer.

What’s it got to do with me?

Everything. We live in a high-energy society and one that is totally reliant on hydrocarbons, both as a source of energy and a raw material. In addition to light, heat and transportation, nearly everything that you rely on, your mobile phone, your i-Pod, the clothes you wear, the food you eat is dependent on secure and affordable supplies of fossil fuels. Furthermore, it is increasingly apparent that this high-energy lifestyle is not sustainable. Therefore, in your lifetime you will have to experience an energy revolution if we are to maintain our standard of living without doing irreparable damage to the planet’s ecosystem. The car that you will drive, the way you heat your home and keep the lights on and the way your food is produced will all have to change. If they don’t, then you and your children may have to live with the consequences of catastrophic climate change.

Key Websites

• BP Statistical Review of World Energy: Annual on-line publication with lots of detailed statistics on energy, PowerPoint presentations and an energy charting tool

• Department of Energy and Climate Change: The UK Government Ministry responsible for energy matter

• DG Tren: The European Commissions directorate responsible for energy matters, visit their Energy Website for information on the EU’s energy strategy and reports and statistics on energy

• Energy Information Agency: US Government organisation, lots of information and US and global energy with detailed county studies and annual global outlook reports. Also Energy 101, which provides brief and factsheets on key energy issues for the US

• International Energy Agency: an OECD organisation that provides energy research and policy analysis for member states. It produces an annual outlook. Most of its publications are expensive, but it does provide a Key World Energy Statistics publication free on its website

• Organization of Petroleum Exporting Countries (OPEC) : an organisation that represents many of the world’s largest oil exporting states. Its headquarters are in Geneva, Switzerland, and it produces reports that present its view on the global oil industry

• Association for the Study of Peak Oil and Gas (ASPO): Presents the arguments in support of Peak Oil, treat with caution and consider the opposing arguments presented by the oil industry and organisations like OPEC

• Shell Energy Scenarios: Produced by the Shell Oil Company, these present alternative scenarios of the future and provide an excellent basis for discussing what might happen between now and 2050. The report is free to download and there are lots of supporting materials

Michael was interviewed in March 2009.

Professor Michael Bradshaw’s Biography

Michael Bradshaw is Professor of Human Geography and former Head in the Department of Geography at the University of Leicester. His PhD is from the University of British Columbia, Canada. He is currently Editor in Chief of Blackwel Geography Compass & former Honorary Editor of Area.

Michael’s research is on resource geography with a particular focus on the economic geography of Russia and global energy security. In 2007 he received the ‘Back Award’ from the Royal Geographical Society (with the Institute of British Geographers) in recognition of his research on applied aspects of economic transformation in the post-socialist world.

In October 2008 he started a three-year programme of research on Global Energy Dilemmas, funded by a Leverhulme Trust Major Research Fellowship. This project examines the interrelationship between energy security, globalization and climate change.

His publications include: An Introduction to Human Geography: issues for the 21st Century, with Peter Daniels, Denis Shaw and James Sidaway (Pearsons); The Post-Socialist Economies of East Central Europe and the former Soviet Union, with Alison Stenning (Pearsons) and Regional Economic Change in Russia, with Phillip Hanson (Edward Elgar).