2.2 Energy Security
2.2.3 Petroleum
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include China) over the period from 1990 to 2010. After completing their evaluation, they conclude that energy security “is more multifaceted than many policymakers or even scholars may realize,” and suggest that future analyses “must extend beyond traditional themes such as security of fossil fuel supplies and the efficacy of energy markets.”65
2.2.3 Petroleum
When discussing energy security, special attention must be paid to petroleum. Of the various types of energy available, petroleum is unique in its importance to the global
economy, and is the most frequently mentioned in the literature. Von Hippel et al. provide five reasons why petroleum is important in a way that coal or liquid natural gas are not: it is the dominant fuel in primary energy supply; much of it comes from the Middle East, which remains politically very unstable; oil supply and prices are heavily influenced by political decisions of both buyers and sellers; key sectors such as transportation, petrochemicals, and agriculture have no reliable substitutes for oil; and the continued sensitivity of oil prices to speculation, manipulation by suppliers, and currency values.66 The IEA states simply that petroleum “is the world’s most vital source of energy and will remain so for many years to come.”67 In similar fashion, Michael T. Klare argues that petroleum is “utterly essential to sustain the international sinews of globalization – the planes, trains, trucks, and ships that carry goods and people from one region of the planet to another.”68 He cites projects from the United States Department of Energy which state that “world energy output must increase by 57 percent over the next quarter century,” and ominously warns that if this target cannot be
65 Benjamin K. Sovacool et al., "Evaluating Energy Security Performance from 1990 to 2010 for Eighteen Countries," ibid.: 5852.
66 von Hippel et al., "Energy Security and Sustainability in Northeast Asia," 6720.
67 International Energy Agency, World Energy Outlook 2008, 37.
68 Michael T. Klare, Rising Powers, Shrinking Planet (New York: Henry Holt, 2008), 11.
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met, “the world economy will fall into recession or depression, the globalization project will fail, and the planet could descend into chaos.”69
Over the years there has been much debate about the status of the global supply of oil.
In 2001, Klare took a more skeptical stance, assuming that global consumption of oil would likely increase, but that remaining un-extracted petroleum would be more difficult to extract, creating an effective decline in oil supplies.70 By 2008, he would take an even more
pessimistic view, in light of Department of Energy projections showing that oil consumption would outstrip oil production, as well as the looming decrease in the availability of so-called
“easy oil.” 71 He predicts that barring some sort of global cataclysm that reduces energy usage worldwide, “severe shortages are inevitable.”72
Not everyone is this gloomy about oil supplies. Richard Newell and Stuart Iler believe that “[c]oncerns about the physical availability of global oil resources are [therefore] largely misplaced.”73 They point to projections of increasing production from OPEC, which would raise OPEC’s share of production from 40% in 2010 to 45 or even 50% over the next two decades.74 They also believe that by tapping into supplies of less easily accessible oil, “North America has the potential to significantly increase its oil production over the next several decades.”75 They note that the United States production of petroleum “now stands at its highest level in 20 years” as a result of the application of techniques such as “enhanced oil recovery and horizontal drilling or hydraulic fracturing technology,” even as petroleum
69 Ibid.
70 Ibid.
71 Ibid. 37.
72 Ibid., 41.
73 Richard G. Newell and Stuart Iler, "The Global Energy Outlook," in Energy & Security: Strategies for a World in Transition, ed. Jan H. Klalicki and David L. Goldwyn (Washington D.C.: Woodrow Wilson Center Press, 2013), 54.
74 Ibid.
75 Ibid., 57.
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consumption has generally flattened.76 In fact, they claim that if both these trends continue to hold true, North America could achieve net self-sufficiency in oil by 2035.77 Yergin cites the 44 percent increase in US oil production between 2008 and mid-2013 as a cause for optimism about oil supply; he is primarily concerned about political instability in the Middle East disrupting oil prices.78
It should be noted that these predictions were all made at different times. It is also worth noting here that oil prices are not monolithic; there are in fact a variety of different benchmarks based on different types of liquid crude oil, and variations in pricing across these benchmarks reflects concerns such as difficulties in transporting oil from refineries to
markets.79 One benchmark is the price of West Texas Intermediate (WTI), which is a “blend of several U.S. domestic streams of light sweet crude oil.”80 In December 2001, the price of WTI was approximately $19/barrel, and had climbed to roughly $133/barrel by June of 2008.81 The local high in 2013 was $106/barrel in the month of August. Since then the price of oil has plummeted, and WTI currently costs roughly $45/barrel.82 Of course, oil prices have proven to be extremely unpredictable, and because most countries must buy oil on the open market, they must find ways to weather this volatility.
76 Ibid.
77 Ibid.
78 Daniel Yergin, "Energy Security and Markets," ibid., ed. Jan H. Kalicki and David L. Goldwyn, 71.
79 U.S. Energy Information Administration, "Wti-Brent Crude Oil Price Spread Has Reached Unseen Levels,"
U.S. Energy Information Administration, http://www.eia.gov/todayinenergy/detail.php?id=290.
80 CME Group, "Light Sweet Crude Oil (Wti) Futures and Options."
81 U.S. Energy Information Administration, "Cushing, Ok Wti Spot Price (Monthly)."
82 Ethan Lou, "Oil Falls as Stronger Dollar Outweighs Opec Deal Optimism," Reuters, http://www.reuters.com/article/us-global-oil-idUSKBN13C04L.
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