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What Is Energy Security? ( Part I)
Economic Reserch Council
By
A F Alhaji
General/ Supply/Demand
Many
pundits warn about the impact of oil nationalism in oil producing
countries on energy security in the oil-consuming
nations. They ignore the fact that talk about energy independence
and lower oil imports in the consuming countries is another
facet of oil nationalism, which paradoxically leads to greater
energy insecurity. Politicians and IEA officials who press
the oil producing countries for “security of supply” are
instigating nationalism in these one-resource states. They
give legitimacy to an illegitimate concept – “security
of demand.” The rise of both concepts in recent years
hinders cooperation and increases animosity between the two
groups.
US
politicians who call for eliminating dependence on oil to “improve energy security” and at the same time
agree to fund doubling the size of the US SPR to “improve
energy security” are ignorant of inherent contradictions
in their proposals. Politicians who support building up the
SPR in their countries seem blind to the fact that it reduces
commercial stocks, thus rendering vain their efforts to enhance
energy security.
The
contradictions built into the concept of “energy
security” make it as elusive as a needle in a haystack.
Worse, politicians talk about energy security despite the fact
that they do not provide a clear definition of energy security
and do not know how to assess it or measure it. Even energy
literature has failed to come up with a definition that most
people can agree on. In a sense, we are searching the haystack,
but we do not know what we are looking for.
This is the first in a series of articles on energy security
that aims to invigorate the debate on energy security in the
hope that experts and policy makers will have a better understanding
of these issues. The costs of not understanding them are steep
and cannot be ignored: energy independence posturing could
well lead to energy shortages and political instability.
What Is Energy Security?
The debate should focus on answering questions such as: What
is energy security? Is it just a slogan or a real issue that
societies have to deal with? If energy security is a real issue,
what are its main concerns? Is the aim of energy security to
eliminate or reduce the effect of energy shortages or to reduce
energy prices and reduce their volatility? What is the relationship
between energy security, national security, economics security,
and environmental security? Should governments intervene to
enhance the energy security of their nations or leave this
matter to free markets? Why or why not? Should governments
intervene only during periods of market failures, or should
they intervene to prevent market failures? What is the role
of monetary and fiscal policies in improving energy security?
Does
energy security apply only to consuming countries? What about
producing countries? Should oil producers
intervene to
protect the value of their energy exports to get what they
call a “fair price”? What is the fair price? How
does this price contribute to the world energy security? Why
does it vary substantially from time to time? What are the
factors that determine such a price?
Is energy security the responsibility of each country, of
all countries, or a group of countries? What is the exact relationship
between interdependence and energy security? Does cooperation
among energy-producing and energy consuming countries enhance
energy security? What is the theory behind such thinking? Is
there any evidence to show that such cooperation works? Should
that cooperation be market-based and market driven? Or should
it be negotiated?
Role Of SPR?
Does building the SPR enhance energy security? If the answer
is yes, does the location of the SPR matter? Does it matter
who owns the SPR? Should the SPR contain all types of crude
and products or just certain types of crude? As oil imports
increase over time, should the level of the SPR increase proportionally
to keep the days of import cover the same?
Does
energy security apply only to tradable energy resources such
as oil and natural gas or to all energy
sources? How does
nationalism threaten world energy security? Does privatization
of national energy companies enhance energy security? How does
the privatization of the national companies differ from the
privatization of energy resources? And finally, does energy
self-sufficiency enhance energy security? Now I hope that I’ve
got you thinking.
A
F Alhajj is
an energy economist and associate professor at the College
of Business Administration, Ohio Northern University (a@a-alhajji.com).
This is the first
of five articles on the theme of energy security by Prof
Alhajji. The remaining four will be published in future weeks.
Editor's
note: This
article was originally written for Middle
East Economic Survey
(MEES) and
publish by MEES,
on 24-September-2007, MEES, VOL. L., No
39. This
is the first of five articles on the theme of energy security
by Prof
Alhajji.
The remaining four will be published in future weeks. Petroleumworld
reprint this article in the interest of our readers.
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