Energy security is complicated, and multi-dimensional. It goes beyond over-simplified notions of energy self-sufficiency or energy independence. It’s about where our energy comes from and its the cost, reliability, sustainability, and scale of our energy use. Technical, economic, geopolitical and other factors all play a role, and one needs to understand how they interact. Energy security is not just a matter of energy; it’s about how energy affects national security.
The following contains portions of a podcast produced by The EnergyXchange One can access the audio and/or the transcript of the entire conversation between myself, Guy Caruso, Charles Ebinger, and Jan Mueller at energyx.org. The discussion below also relies on analysis discussed in “Energy, Economic Growth, and Geopolitical Futures” (MIT Press, 2015) by Stacy Closson and myself. The argument below represents my interpretation of these two works and does not purport to represent the views of anyone else.
A common sense definition of energy security would be access to energy supplies on a timely, affordable, and sustainable basis. It would also include the ability to respond to emergencies or disruptions, whether they be political or natural causes, in sustaining the ability to respond to energy shortages in whatever form they may occur. This qualitative perspective might be called a resilience-based definition of energy security, focusing on the short term. To think about the long-term and to try to measure energy security quantitatively we could define energy security for a country as energy exports (in volume terms) less energy imports, divided by energy demand. This gives us a simple ratio that goes up or down depending on domestic production and domestic demand for energy. This ratio was getting much worse for the United States for several decades until a sharp turnaround in the last 5 years, suggesting an improvement in US energy security.
A somewhat different and perhaps better definition is net nominal imports over nominal GDP. The first quantitative definition use energy volumes (in BTUs, for example). The second uses nominal dollar figures so prices are part of the picture too. Under the second definition, even if the volume of energy imports falls, sharply rising prices of those imports could damage our overall economy and our perception of energy security.
Either or both of these measures can be calculated for all countries. My work uses a quantitative model to project these ratios into the future based on alternative assumptions about energy supply and demand, GDP growth, and other factors. Energy security of one country depends not just on these simple ratios, but also on the energy security of other countries. Even if US energy security increases in the future because of the fracking revolution, the overall US security situation could deteriorate if other countries find themselves in what they perceive as dangerously insecure positions.
In Energy, Economic Growth, and Geopolitical Futures we worked through eight scenarios with different plausible assumptions about energy demand and supply and economic growth for 182 countries for forty years. The scenarios were formulated with the help of our colleagues and students at the University of Kentucky and a group of outside advisers. The quantitative results were developed with the aid of the International Futures Model, created and maintained by Dr. Barry Hughes at the University of Denver.
Our starting premise was that more US and global energy production would lead to lower energy prices, less pricing power by OPEC, and less vulnerability to shipping choke points. It should lead to enhanced US energy security by any of the definitions offered above. This is a nice scenario from the US point of view and in some of our scenarios enhanced US energy production really does lead to improvements in US energy security. But these scenarios assume that energy production is growing everywhere, and GDP growth is strong everywhere—or almost everywhere.
In one benign scenario, China’s economic growth remains high and the country is assumed to boost energy production and energy efficiency strongly. We also assumed that geopolitics are also moving in a benign direction and China becomes—in Robert Zoellick’s term—a responsible stakeholder.
Changing the assumptions about China’s energy production and political orientation, however, could drastically affect the US position. In another scenario we assume Chinese GDP growth is not strong, its energy production and energy efficiency do not grow, and it becomes an aggressive revanchist state rather than a responsible stakeholder. It becomes more and more nervous about its dependence on long energy supply lines from the Persian Gulf and Siberia. We also assumed in this scenario that as the US becomes more energy self-sufficient it disengages to a certain extent from the rest of the world, militarily and politically.
In one scenario, China attacks Russia to seize eastern Siberian oil and gas fields and pipelines. In another, it seizes all of the contested islands in the East and South China seas and establishes military hegemony over the entire region. If force is used to allocate global energy rather than the market everyone’s energy security is affected. Even if the United States remains uninvolved in this fighting, its energy security could be damaged by higher global energy prices and increased uncertainty about cross-border energy flows.
In another scenario, improvements in US and global energy production lead to low global prices and lower energy imports but a reduced level of security because of growing turmoil in the Middle East. In this scenario, the US gradually reduces its presence and influence in the Middle East. Iran, reeling from low oil prices, senses an opportunity. The mullahs demand that the U.S. military withdraw its already depleted forces from the region, that Saudi Arabia and the other Gulf states curtail their oil production, and that all ships passing through the Strait of Hormuz pay high transit fees to Tehran. The United States and Israel are encouraged by the Saudis to fight, but half the American fleet is incapacitated in the first attempt to force the Strait and the fleet quits the fight altogether after Tel Aviv and Haifa are obliterated in separate nuclear attacks. Iran becomes the regional hegemon. It alone now sets the OPEC production quotas, enforcing its decisions with the threat of military force. US energy producers are delighted—the prices they can charge are higher than otherwise—but the US economy suffers.
Both my podcast colleagues and Energy, Economic Growth, and Geopolitical Futures worried about the effect of the response to the threat of climate change on energy security. Charles Ebinger stated that ”if the commitments coming out of the Paris talks are real it means that we are going to see a dramatic move over time … away from fossil fuels”. Unless there is a surprising amount of technological change in the production of renewable fuels it is hard to see how this politically-mandated retreat from fossil fuels will not reduce energy security.
We constructed an IPCC scenario in our book. We assumed a consensus is reached, at least among the OECD countries, that the fossil-fuel driven economy is environmentally unsustainable and that much higher fuel taxes are the way to proceed even if it means lower economic growth. Most of the rest of the world declines to follow the OECD example. Rapid increases in the automobile fleets in China and elsewhere, and continuing construction of new coal-fired power plants lead to increased greenhouse gas emissions. Eventually, however, pressure from the West, a growing public awareness of the dangers from climate change, and a series of environmental disasters lead to a growing global willingness to act. This is a benign scenario in the sense that all, or most, countries, over time, peacefully, comply with the climate change mandates. There is a substantial rise in transfer payments from the OECD to the poorer nations, but economic growth is lower everywhere, and the trend toward income convergence between the OECD and the rest—a trend in evidence since the late 20th century—stops. Only a very small reduction in global temperature is noted by 2050 (the last year simulated in our exercise), but larger effects are expected toward the end of the century.
One could say that this IPCC scenario, given all the assumptions about political accord, enhances US and global energy security in the long run. I personally wonder if the economic losses and the short-term disruption are worth it, given the risk. I am skeptical of the catastrophic anthropogenic climate change predicted by the IPCC computer models. My opinion is based on my years of experience working with large scale models. The IPCC models are not validated in any meaningful sense. They cannot predict the recent past without significant a-theoretical add factors. They have not forecast the near future for 1995 to 2015 at all well. They have never even attempted to explain the vast changes in climate over the past 500 or 1000 years. My views on the modeling issue, I think, are similar to those of eminent climate scientists such as Richard Lindzen, Judith Curry, and Roger Pielke, Sr.
We put an IPCC scenario in our book because some people who helped us put it together believe in the seriousness of the risk of catastrophic anthropogenic climate change. Many people do. On the other hand, when Dr. Closson and I talk to audiences about our book and we present the scenario based on these climate assumptions and the political response to the perceived threat, the IPCC scenario is always rated the least likely of the eight we present—even less likely than the nuclear attack on Tel Aviv–because most people don’t believe the underlying assumptions are very realistic.
JC note: As with all guest posts, please keep your comments civil and relevant