Energy Security Depends on Where You Live
By Alexandra Reihing | September 14, 2007
Your definition of energy security might just depend on where you live. For consumer countries like the United States, China, and Japan, energy security means reliable sources of supply. For producer states like Russia and Saudi Arabia, security equates to high prices and stability in global markets.
The United States consumes 25 percent of the world's oil, though it owns a mere 3 percent of proven reserves. As a result, it spends more than $100 billion per year on imports from the Middle East. The United States spent an additional $137 billion in 2006 safeguarding its oil supply in the region.
Foreign imports are expected to reach 65 percent of U.S. oil consumption by 2020, and a U.S. Department of Energy study found that $1.16 trillion has been transferred to oil-producing countries over the last 30 years. In total, the hidden cost of imported oil is $825 million per year in the United States, according to the Institute for the Analysis of Global Security (IAGS).
Former U.S. National Security Advisor Robert McFarlane commented on the U.S. oil dependency at a 2006 NATO Forum on Energy Security and Technology. "If by 2025, all cars on the road are hybrids and half are plug-in hybrid vehicles, U.S. oil imports would drop by eight million barrels per day. If all these cars were also flexible fuel vehicles which can run on ethanol and methanol, U.S. oil imports would drop by as much as twelve million dollars per day," McFarlane said.
The emergence of China's economy has squeezed oil supply and put increasing pressure on prices. The Chinese economy is growing consistently at 8–10 percent per year, and the energy needed to sustain this growth will likely increase 150 percent in the next decade. By 2010, China will have 90 times more cars on the road than it did in 1990. This is largely due to a transition away from bicycles and toward private automobiles, which have become dramatically cheaper.
China is currently the world's third largest oil importer, with 58 percent of its supply originating in the Middle East. In order to secure supply, China has crafted strategic alliances with at least nine countries, including Iran, Sudan, Russia, Kazakhstan, Saudi Arabia, Brazil, and Venezuela. By 2030, China will be importing as much oil as the United States does now, setting the stage for friction over access to Persian Gulf oil.
"China subjugates its foreign policy to its energy needs and this puts strains on the international community's ability to deal with security problems," said Gal Luft, IAGS executive director.
According to Kenneth Lieberthal and Mikkal Herberg in "China's Search for Energy Security: Implications for U.S. Policy," a 2006 report for the National Bureau of Asian Research, "China has experienced demand growth that has accounted for nearly one-third of the world's total oil demand growth during the past decade and is adding the equivalent of a medium-size country to world oil demand each year."
In order to maintain its current growth pattern, China's oil consumption must increase at a staggering 7.5 percent per year over the next two decades (compared to 1 percent for industrialized countries). Maintaining growth will therefore depend on securing reliable sources of energy, without which Chinese living standards may stagnate or drop. Resulting social instability could threaten the regime.
Japan is also highly dependent on imported oil and must contend with China's rapid growth. The New National Energy Strategy, introduced by the Ministry of Economy, Trade and Industry in May 2006, calls for increasing stockpiles of oil and gas and greater government involvement in the development of oil alternatives.
"There has never been a time when a comprehensive energy strategy has been more sorely needed for a country as poor in energy resources as Japan," indicates a 2006 report by the Japan Forum on International Relations.
Taro Aso, the Japanese minister for foreign affairs, has stressed the importance of protecting Japanese interests by strengthening international agreements. He has asked the International Energy Agency to play a larger role in regulating energy security and stability of supply, in particular the "emergency response mechanism" through which oil from all 27 member countries is released from their stockpiles in case of unexpected supply disruptions such as natural disasters.
Producer countries face the same issues from a different angle. "For producers, energy security means principally security of demand. From their perspective, high prices equal more income and more valuable reserves. They worry about overinvestment in new capacity that could cause sharp price declines as occurred in the 1990s," writes security expert Graham Allison in the International Herald Tribune.
Russia and Saudi Arabia are prime examples of the supply side. Between them they hold 59 percent of the world's proven oil reserves. In 2004, Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi, confirmed that his country is committed to "ensuring the availability of sufficient supplies of energy to meet the needs of the world's growing economies."
Luft of IAGS identifies two threats facing producer countries. The first is a reliable market. The second is the security of transport infrastructure and sea lanes.
"Producers are often forced to ship their product via transit states and their energy security depends on the stability of those conduits," Luft said in an interview. "Those countries are often affected by events and developments in their neighborhoods."
Fierce competition for scarce energy resources could shake up international politics in the near future. The United States and China have already clashed over China's involvement with unsavory regimes. Yet it appears that consumer states have a shared interest in the exploration of alternatives to oil and gas, especially with the added motivation of mitigating climate change.
Another challenge unites consumers and producers—terrorism. In producer states, there is a constant threat of terrorists targeting oil infrastructure. Luft concluded: "Altogether the oil market loses over one million barrels of oil every day due to politically motivated sabotage. If we had this oil in the market today prices would have dropped by nearly $20 per barrel. This is in essence a terror premium we all end up paying."
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