2.2 Energy Security
2.2.1 Traditional Concept
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Wei et al. take care to note that the primary focus of energy security can change as the international situation changes: as scholars like Klare and Yergin have argued, energy (and oil in particular) is a strategic good during wartime, and so nations have no choice but to prioritize security of supply when at war.
2.2.1 Traditional Concept
When the primary focus of energy security is security of supply, insecurity results from reduced supply, whether because prices climb or because of political instability. While there are varying explanations of energy security even within this view, the most commonly mentioned factors are physical supply and the market price of energy. Political instability is considered a factor that negatively affects both, and is also frequently mentioned.
Cherp and Jewell provide a broad overview of three primary perspectives of energy security, all of which seem to fall under the traditional concept. They label these the
“sovereignty” perspective, the “robustness” perspective, and the “resilience” perspective. 39 They define the central question of the sovereignty perspective as “who controls energy resources and through which mechanisms?”40 This perspective is the oldest of the three and can be said to have come into being when the British Navy switched from domestic coal to imported oil in the early 20th century. Oil was a critical resource during the first half of the 20th-century because of its use as a primary fuel for the military. After the Second World War, oil became important in the industrialized war not only as fuel but also for “food production, health care, manufacturing, heating, and energy generation,” but most industrialized countries could not produce enough oil for their own use, especially when former oil-producing
39 Aleh Cherp and Jessica Jewell, "The Three Perspectives on Energy Security: Intellectual History,
Disciplinary Roots and the Potential for Integration," Current Opinion in Environmental Sustainability 3 (2011).
40 Ibid., 3.
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colonies became newly independent states.41 The primary threats under this perspective are intentional, such as embargoes or the “malevolent exercise of market power”, but these risks can be minimized by “casting military, political and/or economic control over energy systems”
through alliances, deals, or military action.42
This thinking is in line with the view of the International Energy Agency, which in its 2008 World Energy Outlook stated that a key energy challenge of the modern era is “securing the supply of reliable and affordable energy.”43 Maria-Floriana Popescu takes a more
pessimistic view of energy security, defining it as “the overlap between economic security, national security and the environment’s security.”44 She argues that the importance of energy to the economy, and the way the economy “links the degrees of dependence, interdependence, and subordination of states” means that “competition for control and distribution of
hydrocarbons” will only grow in intensity.45 While this view is borderline zero-sum, the emphasis on naked competition over access seems to fit with the sovereignty perspective.
Cherp and Jewell’s robustness perspective differs from the sovereignty perspective in that it is primarily concerned about “vulnerabilities of energy systems to factors other than politically motivated disruptions to access to oil and gas.”46 It introduces the idea of globally limited energy resources, whether in terms of actual physical limits or in terms of other constraints on energy consumption such as climate change. Under this perspective, threats are not directed, but instead occur naturally. These threats include “growth in demand, scarcity of resources, aging of infrastructure, technical failures, or extreme natural events,” and can be
41 Ibid., 1.
42 Ibid., 5.
43 International Energy Agency, World Energy Outlook 2008 (Paris, France: International Energy Agency, 2008).
44 Maria-Floriana Popescu, "The Economics and Finance of Energy Security," Procedia Economics and Finance 27 (2015): 467.
45 Ibid., 472.
46 Cherp and Jewell, "The Three Perspectives on Energy Security: Intellectual History, Disciplinary Roots and the Potential for Integration," 4.
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managed by “upgrading infrastructure, switching to more abundant energy sources, adopting safer technologies, and managing demand growth.”47
The resilience perspective is the newest of the three. Cherp and Jewell explain that this perspective developed after many countries de-regulated their energy supplies in the 1980s and 1990s, under the belief that “markets can deliver energy more efficiently and ensure necessary investment in energy infrastructure while the diversity of market actors guarantee[s] security of supply.”48 This commodification of energy products brought
economic analyses to the forefront of energy security studies, shifting the focus from physical availability to the market price of energy itself. A related idea introduced during this period was that of diversifying risk. This idea came from risk analysis in investment portfolios, and posits “risks of failures of energy systems can be minimized by applying the mean-variance portfolio theory (MVP) in order to diversify among energy options with different risk profiles (as reflected in their price history).”49 The threats that this perspective focuses on are
considered inherently unpredictable and uncontrollable, such as unforeseen economic crises or booms, political regime change, or climate fluctuation. Because the resilience perspective sees threats as being unpredictable, it seeks to protect against them by “spreading risks and preparing for surprises.”50
Andreas Löschel et al. refer to the IEA’s claim that energy insecurity “stems from the welfare impact of either the physical unavailability of energy or prices that are not
competitive or overly volatile,”51 and attempt to expand on that definition but only to the extent that they want to operationalize “competitive” and “overly volatile”. They are still
47 Ibid., 6.
48 Ibid., 4.
49 Ibid., 5.
50 Ibid., 7.
51 Andreas Löschel, Ulf Moslener, and Dirk T.G. Rübbelke, "Indicators of Energy Security in Industrialized Countries," Energy Policy 38 (2009): 1665.
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operating under the assumption that energy security is primarily about maintaining security of energy supply. Their contribution is a distinction between what they term “ex-post indicators”
that explain energy-related economic frictions in the past, and “ex-ante indicators” which attempt to forecast potential causes of economic friction. One interesting finding is that factoring political risk of supplier countries can skew projections about energy security, which aligns with the idea of threat as put forth under the resilience perspective.
Daniel Yergin on more than one occasion combines features of Cherp and Jewell’s three perspectives. He defines energy security simply as “the availability of sufficient supplies at affordable prices.”52 In 2006 he proposed four principles that policy-makers should attempt to abide by when thinking about energy security, a list which had grown to ten principles by 2013 (bolded items appeared on both lists):53
1. Diversification
2. The importance of the United States in the global oil market
3. The need for a domestic security margin (either spare capacity or emergency stocks)
4. The role of resilient and well-functioning energy markets 5. The importance of building relationships with exporting nations 6. The need for cooperative relations among importing nations
7. The importance of high-quality information (to prevent speculation and panic)
8. The importance of a robust domestic industry 9. The role of research and development
10. The importance of planning for disruptions
These principles are based on Yergin’s recognition of the fact that there is only oil global oil market that determines prices, but that there are also a number of suppliers within that market of varying degrees of reliability. While he does not quantify what it means to meet these principles, they provide an easily understood framework for the traditional concept of energy security.
52 Yergin, "Energy Security and Markets," 74.
53 Ibid.; "Ensuring Energy Security," Foreign Affairs 85, no. 2 (2006): 75-80.
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The focus on supply naturally means that threats to a nation’s energy supply are threats to a nation’s energy security. Philip Andrews-Speed classifies these threats into two categories based on the scope of their impact: global events and local events.54 Five types of events exist under the global event category: policy discontinuities, fundamental
discontinuities, force majeure disruption, export disruption, and embargo disruption. Policy discontinuity refers to “sudden and unpredictable” changes in price that come as a result of OPEC decisions to adjust output levels.55 Fundamental discontinuity refers to “a long-term failure to invest in production, transportation or processing capacity [that] could result in an absolute shortage of supply of energy with respect to the global demand.”56 It stands to reason that this type of disruption would significantly impact the global economy for a period of years, as energy-importing countries struggle to cut back on their own energy consumption waiting for new infrastructure to be built. The next three disruptions are slightly more
political in nature: force majeure disruptions are disruptions as a result of civil or interstate conflict involving exporting nations, or even trade route blockages. Export disruptions involve exporting nations deciding to cut back on exports, and embargo disruptions occur when importing nations embargo a specific exporting state.
Local events that can threaten a nation’s energy security are embargo disruptions, logistical disruptions, and local market disruptions. Embargos can be general embargos of a specific importing state by the global community, or embargos by a specific oil exporter or even an oil transit state. A general embargo would be most damaging, but is unlikely due to difficulties in coordinating such an effort. A specific embargo is far more likely, and
Andrews-Speed adds that embargos involving pipelines are far more meaningful than
54 Philip Andrews-Speed, Energy Policy and Regulation in the People's Republic of China, ed. Thomas W.
Wälde, International Energy and Resources Law and Policy Series (The Netherlands: Kluwer Law International, 2004), 337.
55 Ibid.
56 Ibid., 338.
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maritime embargos because “[s]hips can be diverted, but pipelines are immovable.”57
Logistical disruptions can be accidental or deliberate (terrorism), and tend to be endemic over long distances, but are generally short-lived and can be mitigated. The final type of local disruption is the local market disruption, which occurs within a state. This type of disruption can result from government mismanagement or monopolist suppliers.58
In summary, the core of what I define as the traditional energy security concept is narrowly focused on threats to supply. Strictly speaking, it does not have to be about
petroleum, even if petroleum seems to be a frequent focus of the literature. These principles are equally applicable to other resources such as natural gas or coal; shocks to the supply of any energy resource can be equally disruptive depending on a country’s fuel mix.