Energy Geopolitics Roundup


At Ideas on Energy we love grappling with the most challenging questions about our shared energy future.  Over the past four months a number of excellent publications have come out regarding big picture energy security trends and geopolitics.  Falling under the “I read it so you don’t have to,” category of posts I am going to summarize some of the more interesting papers that have recently been released, although all of these papers are worth spending some time with.

Earlier this week Shell published the excellent “Shell Energy Scenarios to 2050: Signals and Signposts”.  This is a fascinating document in that it maps out future energy scenarios based not just on the usual supply and demand forecasts but also looks at broad geopolitical trends and actively advocates for countries to expand coordination of policies that will significantly reduce greenhouse gas production.  The forecasts for demand are based on relatively uncontroversial assumptions that global population growth will continue for the next 40 years and that emerging economies (read India and China) are entering the most energy intensive phase of their development.  Global energy demand will triple between 2000 and 2050 but increases in production and efficiency and not likely to keep pace.  This document looks at how will the world deal with both the significant gap between supply and demand as well as the environmental stresses created by increased energy demand.

Shell sees two possible categories of scenarios to deal with these challenges.  The first is “scramble” whereby each country tries independently to secure as much supply for itself as possible.  Demand management and environmental concerns are shunted to the side as long as possible although eventually economic growth is constrained by access and environmental challenges which finally forces countries to take action.  The other possibility is “blueprint” whereby coalitions of countries, NGO, and citizens recognize that they have a collective interest in a proactive approach to energy and environmental management.  Private sector entities under this scenario at the same time realize that regulatory certainty will enable commercial investment and profit.

The paper then looks at which of these directions is more likely for the future based on the global economic reconfiguration of 2008 which Shell boldly proclaims has shifted political power from West to East, increased the involvement of states in both domestic and global economics, and decreased the trust between the governed and politicians in democracies making regulation more difficult.  Although it does not clearly state whether the authors think the world is heading more in a “scramble” direction or a “blueprint” direction, they do note that “global inaction, might lead people to shrug off the climate issue. Many are quick to doubt the science. Amid such ambiguity a discontinuity is building as expert and public opinion diverge. This divergence is not sustainable!”

The Center for Strategic and International Studies also looks at the drivers of energy geopolitics reaching out to 2035 in their publication “The Geopolitics of Energy”.  The authors point to the political centrality of energy in the developing world since economic growth is as important a justification for political power in authoritarian China as it is in democratic India.  They note that for those looking at new sources of energy such as natural gas to be primary drivers towards a lower carbon energy future, we still face a geographic concentration in a few countries that many do not want to politically empower.  Although gas allows for a diversification of supply in the U.S. and Canada, extraction from unconventional sources in the Western hemisphere is a high carbon process.  Low carbon extraction is possible mainly in Iran, Qatar, and Russia.  Also, most renewable sources of energy require rare earth elements which would create supply bottleneck risk from countries like China or Bolivia.  The paper concludes that “single issue advocacy, unbridled optimism, and blind reliance of technological innovation are woefully inadequate though they frequently masquerade as policy prescriptions.”

In the Chatham House publication “More for Asia: Rebalancing World Oil and Gas”, author John Mitchell focuses on the impact that a reorientation of oil and gas supply chains towards Asia will have.  Increasingly, state owned buyers in Asia will purchase supplies from state owned suppliers in the Middle East.  He sees this as decreasing the role of the private sector in both investment and trade globally.  Additionally, this will make the Middle East less reliable as a supplier to Europe and will increase European reliance on Russia for supply at a time when the EU is trying to decrease that dependence.

Pipeline Politics in Asia”, released as an edited volume after a conference conducted by the National Bureau of Asian Research, focuses on the implication of projections out to 2030 that China and India combined will account for 50% of global energy demand growth, 60% of oil demand growth, 20% of gas demand growth, and 85% of coal demand growth.  We are reminded of Winston Churchill’s speech to the British House of Commons in 1913 where he states, “On no one quality, on no one process, on no one country, on no one field must we be dependent.  Safety and certainty in oil lie in variety and variety alone.”  Energy security relies on diversity but diversity is expensive, which raises a fundamental question: who benefits and who pays?  This lays the groundwork for even more state involvement in creating supply networks when market forces alone are not enough to guarantee needed energy security.

One of the more interesting questions raised in this collection is the degree to which the search for secure energy supplies is and should be seen as a competition.  The different authors of each chapter offer different perspectives on this question.  The U.S. is trying desperately to direct gas pipelines away from Iran, even though an Iranian route makes the most sense from a purely economic perspective.  Some in the U.S. are concerned that Chinese attempts to secure supply from Central Asia may undermine the potential supply scale needed for U.S. favored, Western directed pipeline projects.   China clearly does see the U.S. as a threat to its energy supplies, especially given the fact that approximately 80% percent of China’s imported oil flows through the straits of Malacca, an area where the U.S. currently enjoys naval superiority.  On the other hand, secure supplies of energy for China are good for the stability of global energy markets overall.  As one author notes “It would be short-sighted for Western governments and companies to see Chinese pipelines out of Central Asia as a threat rather than a possible opportunity.  If China is willing to pay a premium for diversity of supply from Central Asia, it enhances rather than harms global energy security.”

Reading through all of these papers, I am struck by the consist trends which all of them note regarding the significance of increased demand from Asia, the need to diversify supply to ensure security, and the challenges of collective action.  What is less clear is how we can address these collective action problems given the global political trends we face.  What do you think is the best way to turn what many view as a competition for resources and influence into an opportunity for us to cooperate towards our shared goals of economic prosperity and environmental balance?


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