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Summary : Daniel YERGIN, The quest : energy, security and the remaking of the modern world

17 juillet, 2014 | Commentaires fermés sur Summary : Daniel YERGIN, The quest : energy, security and the remaking of the modern world

Chap. 13 : The security of energy, Penguin Books, 2012

Energy security is not simply concerned by the threats, human or natural upon the energies supply chains. It is mainly about the international relations between actors, how they implement their strategies and their results on their behaviors regarding their national interests.

The first act of the oil tragedy on the international stage took place in 1911 (half a century after the first drill by Colonel Drake at Titusville in 1859), when W. Churchill decided to update the Navy domination upon the world oceans through the use of oil instead of coal. It would give an advantage to the Navy against the German fleet in the race for world power on the seas. Indeed, the use of oil meant the Navy would rest on oil from Persia instead of coal from Wales. Facing such challenge, the first lord of the Admiralty answered with the diversification of supplies principle to implement Britain’s energy security.

Today, energy security is still a corner stone of any industrial countries foreign policy, especially the new one like China. It revealed the national interest for reliable supply of energy which sustain economic growth an political stability.

Usually, the dimensions of energy securization constituted a triangle :

EnergySecurity

Physical security is the protection of infrastructure and sea routes.

Availability of energy supplies is the ability of a country to develop energy sources, physically, contractually and commercially

International regime is the set of principles, norms, rules and decision making through international institutions to coordinate national policy in case of a producer embargo or a consummer sanctions.

An embargo is a decisional situation which entailed a scramble for oil among companies and countries. At severals points in history, it shake the alliance among western government because it is a tremendous strain from the society upon the political regime.

The overarching goal of energy security it to promote investment and innovation to enable supply and demand encounter on the market in a timely way.

From the 1974 Washington energy conference after the first oil shock, the International Energy Agency (IEA) was created to balance the provider power of the OPEC. Its goal is to manage the “oil weapon” in order to neutralize any attempt of a supplier to implement an embargo against one of its customer. As a matter of fact, today, it is the UN which manage the sanction plan against a provider, like Sudan or Iran, to implement the “oil weapon” against its political will. The oil customer power is far greater than the supplier one.

The IEA should help its members to share their strategic oil sockpile when a disruption take place, whatever its origin : political bargain or natural disaster. The principle is to share information about member needs so each one trust the other and it decreases the incentive for the scramble of oil which exacerbates the market reaction. The IEA members have 1.5 Gb, which about 700 mb in the US Strategic Petroleum Reserve. It represents 2 years of the iranian production.

Since the inception of this institution, it triggered three times the stock sharing process :

–   In 1991, during the Gulf War

–   In 2005, due to Katrina and Rita hurricanes

–   In 2011 during the Lybian civil war

Actually, the 1991 Gulf War set a new cooperation framework between the IEA and the OPEC. It opened a new producer-consumer dialogue aim at oil market stability around 90 mbd. A new organisation, the International Energy Forum was installed, it is about 90% of the global oil production and consumption. It improves the market transparency with the help of producer and consumer which share energy data to increase the market efficiency and regulation role.

Based on this information, the spare production capacity may be triggered on purpose in oil exporting countries to avoid an unjustifiable rise of the price and the beginning of a fear of shortage. It is also a mean to provide a rational incentive for investment.

However, some risk may not be covered by the market role, for example, the oil supply chain is highly vulnerable to cyberattack. The energy networks, among which the electricity network, is a critical infrastructure. As a consequence, great power in the cyberspace may target this network and cause a disruption. These greats powers regularly practice cyber espionage, denial of service, introduces malware, steals data etc.

Another threat are the chokepoint of the sea routes under the risk of terrorist or government attack. The Malacca Strait (10 mbd), the Strait of Hormuz (12 mbd), the Bosphorus Strait (3 mbd), the Mab el Mandeb Strait (3 mbd), the Suez Canal (2 mbd) and the Panama Canal (0.6 mbd).

chokepoint

 

Moreover, these security matters are under the management of the US military forces, through the Cybercommand and the NSA or the Navy. The choke point security is guaranteed by the most powerful actor :  the US, not the new one : China…

In order to favor the “dialogue approach”, the challenge for the International Energy Forum is to convince the new player : China, that its interest can be served by the IEA and the global market. The purpose is to contain the commercial comptetion to avoid it does not turn into national rivalries.

In this context, the energy independence motto may be a new solution. Indeed, it was introduced by president R. Nixon in 1973 as a response to the use of the oil weapon by Middle East oil producer against the americain support of Israil in the Yom Kippur war.

Energy independence simply means oil independence because the US are almost self sufficient in caol, nuclear, hydraulic and gas. In 2005, the US imported 60% of its oil.

Today, US oil production increased 25% between 2008 and 2012, as a result, its net oil imports fell to 42% in 2012. This new unconventional oil production growth, added to Brasil’s offshore and Canada’s oil sands enable the “Western Hemisphere” to give up oil importation from the Middle East. Instead, this production will supply the asian market, espacially China and it will stabilize the market.

To go furtheur the the interview of D. Yergin by H. Kreisler from UC Berkeley :

http://conversations.berkeley.edu/content/daniel-yergin

and the You Tube version

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