The Evolving Concept of Energy Security

Open the daily newspaper, and you are likely to find an article about domestic oil prices or global warming featured prominently. But you are at least as likely to see an article about Russian energy supplies, or the threatened renationalization of an energy company in Latin America, or European worries about energy dependence—in other words, an article about energy security. Concerns about energy security are now at the forefront of many current debates on energy policy, profoundly influencing the way decision-makers think about a range of issues from national and economic security to international diplomacy.

Condoleezza Rice, the former U.S. secretary of state, has expressed her surprise at the extent of this influence in a statement saying: I can tell you that nothing has really taken me aback more as secretary of state than the way that the politics of energy is—I will use the word ‘warping’—diplomacy around the world. ¹

After a long period of relatively cheap energy prices, the tightening of global energy markets in recent years has led energy consuming nations to realize how dependent they are on energy exporting nations that may not share their foreign policy and security agendas. This sense of uncertainty is deepened by the knowledge that many of these exporters are acutely vulnerable to a variety of disruptions beyond their control.

At the same time that anxious energy importers have begun to scrutinize the security of their supplies, the governments of many energy exporters have become more aggressive in reminding trading partners of the leverage they hold. They also are bolder in maximizing the profits that the state realizes from energy sales. The delicate relationship between energy importing nations and energy exporting nations has assumed an increasingly important role in international relations.

Stability of supply and demand has become an issue of national security for both parties to this relationship. As New York Times columnist  and author Thomas Friedman has pointed out, Thinking about how to alter our energy consumption patterns to bring down the price of oil is no longer simply a hobby for high-minded environmentalists or some personal virtue. It is now a national security imperative. ²

In this context, national security encompasses a broader range of ideas than just defense. This brief will not address defense policy issues specifically, but readers interested in this subject could start by looking at the sections on “Reprocessing and Breeding” (in Appendix D) and “Nuclear Nonproliferation” under “Nuclear Power.” The primary goal of this section is to examine the evolving concept of “energy security” to see how it fits into ongoing debates, particularly those about the need for energy independence.

Energy Security vs. Energy Independence

Many policymakers, particularly in the United States, seem to equate energy independence and energy security, arguing that one will necessarily lead to the other. Much of the political rhetoric of the Bush administration from 2001- 2008 emphasized the need to decrease America’s dependence on oil from the Middle East and increase the stability of the nation’s energy supply, partially by boosting domestic production and partially by relying on new alternative energy sources and technologies, such as ethanol. This focus on energy independence can be misleading. A more comprehensive notion of energy security should take into account three principles that supersede the objective of independence: resilience, diversity of supply, and global interdependence.

The new Obama administration energy policy has tried to create practical mechanisms for decreasing the U.S.-Middle East oil dependency.  These mechanisms include high investment for the research and development of green technologies and the creation of 600,000 green jobs in the U.S. over the next ten years. This policy seeks to promote energy efficiency, oil independence, and promote U.S. competitiveness through CO2 emissions reduction.³ 

Click here to listen to a podcast of the Obama Energy Plan

Resilience

Resilience is best thought of as a “security margin” that would allow a country to absorb any minor shocks to its energy supply and “facilitate[] recovery after disruptions.” This “buffer” can take many forms, including “spare production capacity, strategic reserves, backup supplies of equipment, adequate storage capacity along the supply chain, and the stockpiling of critical parts for electric power production and distribution” ⁴. American proposals to drill in the Arctic National Wildlife Refuge (ANWAR) or to boost strategic reserves, for example, are aimed at improving the U.S.’s resilience to threats of foreign supply disruptions.

Diversification of Supply

Rather than fixating on the idea of energy independence, many argue that champions of energy security should think more about how to achieve diversification of supply. If a country can broaden the base of suppliers from which it imports energy, it is less exposed to the risks of a major supply disruption. The United States, for example, has successfully managed to wean itself off complete dependence on the Organization of Petroleum Exporting Countries (OPEC) over the last 20 years, decreasing its share of energy imports from OPEC nations from 72 percent in 1977 to 54 percent in 2007 ⁵. (For more on OPEC, see "Oil Supply II: Producers”.)

Source: http://www.factsonfuel.org/gasoline/index.html

At the same time, because overall global supply and marginal prices are the determining factors in the energy prices paid by any country (see “Oil Markets”), diversification of supply does not protect an energy importer from fluctuations in global markets. In other words:

Diversification of U.S. oil imports is not an adequate answer. Oil is like any other commodity—the last unit sold determines its price. The United States could shift all its purchases to sources that are relatively safe politically, such as Canada and Mexico, and it would still not be protected. The global price is what matters most.⁶

Diversification of supply is a vital component of energy security, but only one of several.

Global Interdependence

What has become clear in recent years as both importing and exporting countries have grown more sophisticated in their energy policies is that the new reality of the global energy landscape is one of interdependence far more than independence. According to one commentator, all countries, including the United States:

must face the uncomfortable fact that its goal of ‘energy independence’—a phrase that has become a mantra since it was first articulated by Richard Nixon four weeks after the 1973 [oil] embargo was put in place—is increasingly at odds with reality. ⁷

All countries are locked into one very tight, very complex global energy market. True security lies in the “stability of this market” for all participants rather than the narrowly defined interest of any one country in what the Washington Post’s Sebastian Mallaby has called the “pipedream of energy independence.” ⁸

The key to understanding the concept of energy interdependence is realizing that producers desire security of demand just as much as consumers want security of supply. If, for example, it is true that the European Union imports 30 percent of its energy from Russia, it is also true that Russia depends on the European Union for 20 percent of its natural gas revenues. ⁹ Both countries have an important stake in the transaction and in the stability of the environment that allows the transaction to occur. Anxiety on either side can lead to heightened tensions and defensive behaviors that not only damage the relationship between individual trading partners but also impact the broader climate of international relations. 

Take the case of China, for example. China needs vast amounts of energy to fuel the rapid growth of its economy. Consequently, it has been aggressively negotiating energy supply contracts around the world, an action that is viewed by many as a threat to the interests of the United States and its oil assets. ¹⁴ Should the U.S. look to its own interests first and foremost or does it have a stake in China’s success?

Conventional wisdom might advance the former perspective, but the linkages that have been created by global economic integration make the interdependence model the more relevant one. If China’s economy were to falter because of a lack of energy, the U.S. would be hurt as much as any country: American consumers depend on cheap imports from China to maintain their high quality of life just as much as the U.S. government depends on China and other Asian countries to help finance its deficits.

The U.S. and China have a common interest in ensuring that each is able to find the energy it needs to prosper. Traditionally narrow definitions of national interest—still important, but largely a remnant of the pre-globalization era—might ignore this crucial point.

Variable Definition of Security

The definition of energy security is variable, meaning something different for each country. For the U.S., energy security means “producing energy at home and relying less on foreigners;” for China, it might mean “buying stakes in foreign oil fields;” for Russia, it is wrapped up in “restrictions on foreign investment in domestic oil and natural gas;” while for Japan the focus is on “offsetting its scarcity of domestic resources through diversification, trade and investment.” ¹⁵ It is natural for each country to give priority to its own energy needs, but all of these needs must be reconciled if true energy security is to be attained. According to one expert:

Most producers and all consumers have a shared interest in maintaining a stable, transparent framework in which the pricing mechanism can function as freely as possible. This means no unilateral measures and no ‘politicisation’ of energy exports to punish foes or reward friends. ¹⁶

To this end, a regular ministerial-level dialogue between consumers and producers was initiated in Paris in 1991. These meetings have since evolved into the International Energy Forum (IEF), which held its 12th meeting in Cancun, Mexico in March 2010. The IEF focuses on generating “exchange of data, increased transparency of demand and supply information, cooperation between governments and industry, and a better understanding between the two sides of the market” ¹⁷. In a globalized world, energy security will depend on the ability of both consumers and suppliers to cooperate in protecting the stability of global markets.