What Is Energy Security? Part 4/5
by A F Alhaji in Energy Politics Archives Spring 2008
In part 4 of our working history series by Dr. Alhaji, written in 2008, we continue our exploration of the elusive and evolving concept of “Energy Security.” Building on previous installments, this section examines key threats to energy security and introduces six critical dimensions—economic, environmental, social, foreign policy, technical, and security—that shape national and global energy strategies. While this article discusses the first two dimensions in depth, the final four will be analyzed in part 5.
Threats and Energy Security
Threats to energy security can help us clarify further the concept energy security. These include the use of oil weapon by one or a group of oil producing countries. In this case, even countries that are not the target of such a weapon will experience higher oil prices. An embargo that targets the US, for example, will have a limited impact on other countries. But if that embargo is associated with a production cut, other countries will suffer as much as the US or maybe more if they cannot afford to pay the highest price in the market. In a global oil market, supplies will go to the highest bidder Threats also include a sudden peak in world oil production, government intervention, and conflicts among various government policies. Price controls distort the relationship between supply and demand and might lead to shortages. Contradictions among government policies might sometimes favor, for example, a foreign policy that leads inadvertently to energy shortages. In fact, one of the main weaknesses of the energy security literature is the lack of discussion regarding the impact of contradictory policies on energy security. Other weaknesses include the lack of discussion regarding the interactions among various dimensions of energy security and the weight of each dimension of energy security in the formulation of energy policy.
Maximizing Energy Security?
The first three installments of this article have established some parameters that lead to a better understanding of the concept of energy security. In this article I identify six competing dimensions of energy security for both energy-consuming and energy-producing countries in order to reach a comprehensive and clear definition of the term. These dimensions are economic, environmental, social, foreign policy, technical, and security. They reflect the integration of energy policy into other policies and vice versa.
Balancing these dimensions within an energy policy is a very difficult task. While these dimensions are general and universal, the weight of each differs by place and time. The level of interaction among them also differs from country to country and from time to time. Therefore, the concept of energy security is an amoebaean concept at its best. It changes shape and dimensions continuously. Nevertheless, careful policy makers can maximize energy security, especially in the long run.
1. The Economic Dimension
Focusing on the economic dimension of energy security ensures that scarcity of energy resources does not stall economic growth, increase inflation, raise unemployment, weaken the balance of payments, or reduce the value of the county’s currency. The impact of scarcity of energy resources on these key macro variables depends on the strength of the relationship between energy consumption and GDP.
Ironically, the solution in this case does not lie in the energy sector of the economy or in the hands of policy makers in ministries of energy and petroleum. One of the major solutions requires the use of fiscal and monetary policies. Therefore, fiscal and monetary polices should be integrated into any energy policy and vice versa. In fact, among the main reasons why high oil prices have not affected economic growth in recent years are the expansionary fiscal and monetary policies in various consuming countries, especially the US, China, and India.
One of the most important policies to improve the economic dimension of energy security, especially in emerging economies, is to sever, or at least limit, the relationship between GDP growth and energy consumption by increasing efficiency, reducing energy intensity in the industrial sector, and shifting economic activities toward a service oriented economy.
2. The Environmental Dimension
Since the environmental impact of producing, transporting, and burning fossil fuels has health and economic consequences, several countries have incorporated environmental objectives into their energy polices. The problem that faces most countries, especially emerging economies, is how to raise income levels while improving living standards, which includes improving air and water quality. It is obvious that a reduction in energy use will decrease pollution, but this will come at the expense of the economic dimension of energy security. Only improvements in the efficiency of cars, equipment, and machines can reduce pollution and insure economic growth. Therefore, the environmental dimension of energy security is not related to energy resources per se, but to the technologies that use these resources. To ensure energy security, governments should integrate their industrial and technology policies into their energy policies. Such policies will improve efficiency, but they will also affect fuel choice, which may result in contradictions with other dimensions of their energy policies.
Low energy prices may benefit the economic dimension of energy security, but they worsen the environmental dimension. Higher oil prices may not contribute positively to the environmental dimension as some people think. Some environmentalists contend that higher energy prices will reduce energy consumption and consequently reduce pollution. They advocate a substantial tax increase on fossil fuels to reduce CO2 emissions. This approach not only contradicts the economic dimension of energy security, but it also contradicts the environmental dimension itself. Low-income families, who constitute the largest segment in the most populated regions of the world, will not be able to buy the heavily-taxed fuel. Instead they will burn wood, hard coal, and animal dung, which will lead inevitably to deforestation and increased pollution. Therefore, taxation and higher energy prices do not enhance energy security in the most populated countries in the world, namely India and China.
Read full article here.
About the Author
At the time of writing Dr Alhajji was president of the Ohio-based Energy Security Analysts, LLC. The article draws on a chapter entitled “India’s Energy Security: Concepts and Measures” in “West Asia in Turmoil,” Published by The Institute for Defense Studies Analysis, New Delhi, India, 2007. The article has been reprinted with the permission of MEES.
Sources and related readings…
1. From a presentation by Vito Stagliano, Deputy Assistant Secretary of Energy for Policy Analysis during the first Bush Administration, at the Energy and National Security in the Twenty-First Century conference in 1995. The Institute for National Strategic Studies, National Defense University.
2. A statement by Hisham Nazer, the former Saudi Arabian Minister of Petroleum and Minerals Resources, at the 60th annual meeting of the independent Petroleum Association of America in San Antonio on 31 October 1989.
3. A statement by long-time Amoco vice President John Lyman at the Energy and National Security in the Twenty-First Century Conference in 1995. The Institute for National Strategic Studies, National Defense University.
4. The report is posted on the White House web site at: http://www.whitehouse.gov/energy/index.html 5. The infamous Japanese 3 Es are: Energy security, Environmental protection, and Economic efficiency.
6. Williams, James, and A F Alhajji “Parallels with earlier energy crises underscore US vulnerability to oil supply shocks today?” Oil and Gas Journal, Vol 101, No 5, February 2003 See, for example, “RIS Background Paper on India’s Energy Security” conducted by the Center for Research and Information System for Developing Countries, an Indian government backed organization.
7. For discussion on the impact of contradictions of US foreign, environmental , economic, and energy policies on the world oil market see A F Alhajji, “US Energy Policy Contributed to Lower Oil Prices”, World Oil, Vol 220, No 11, November, 1999.