Transcript integrated global

Energy Security
and future of US National Security
NS4053 week 10
Energy issues
and technologies
not covered
in this course.
Baskets of energy security threats
• Energy scarcity
• Energy export dependency
• Climate change
• Resource conflicts
Different conceptions
of energy security
• “Where you sit is where you stand”
– Security of supply
• Continuous and affordable sources of energy.
• Avoid price shocks.
– Security of demand
• Continuous and predictable amount of revenue.
• Maximize revenue.
• Minimize competition from other sources of energy.
Energy scarcity issues
most relevant to US
national security in
oil and transportation
sectors.
Other energy sectors in
US are diversified in
their sources of supply.
US oil and transportation
Energy scarcity and price shocks
• Oil markets are robust and capable of responding
to shocks:
–
–
–
–
Increase production.
Reduce demand.
Private and government energy inventories.
Reroute energy transportation.
• Oil scarcity is not a problem in an global
integrated market.
– Caveat 1: you need all three elements.
– Caveat 2: politicians rarely behave as if this is true.
Economic sources of
energy scarcity insecurity (Yergin)
• Limited spare production capacity.
– Growing production in North America, but
demand is also growing worldwide.
• Global shortage in refinery capacity.
• Mismanagement of oil reserves and
production by some national oil companies.
• Efforts by major consumer states (i.e. China)
to develop bilateral and non-market based
relations to guarantee energy supply.
Geopolitical sources of
energy scarcity insecurity
(Gholz and Press)
• Still the Middle East:
– Consolidation of significant energy reserves under
single state hostile to United States.
– Domestic instability in Saudi Arabia.
– Interruption of tanker traffic in Straits of Hormuz.
• No other part of the world offers the
concentration of supply and production
necessary to create a threat.
Mitigating
energy scarcity
concerns
• Diversification of
supply sources
for energy.
• Strategic fuel
reserves.
• Information and
transparency
• Integrated global
energy market.
Energy export dependency threat
• US will become energy exporter within 10-20
years.
• Unlikely to suffer resource curse:
– Energy will below the critical percentage of total US
exports under any reasonable scenario.
– Governance and rule of law are sufficient to prevent
negative consequences.
• Local and regional economies may suffer a form
of ‘dutch disease.’
– Not a problem at national scale due to diversification.
Energy export dependency threat
• Resource curse is a problem for US national
security in so far as it contributes to periodic
supply-side shocks to oil markets.
– Poor governance, civil unrest, political turmoil in many
oil exporters in developing world.
• Venezuela, Nigeria, Indonesia, Ecuador, Libya, Iraq, Iran,
Saudi Arabia …
• Provides funding for governments unfriendly to
United States.
– Iran and (via arms sales to oil exporters) North Korea
Climate change and national security
• U.S. better positioned than most to mitigate
some but not all consequences.
– (+) Innovative financial markets create hedging
mechanisms.
– (+) Innovative technology sector creates
mitigation solutions.
– (-) Opportunity costs of mitigation.
– (-) Periodic weather related disruptions in
regions unprepared for such events.
Climate change and national security
• U.S. may become magnet for human security
refugees under worst scenarios.
– Immigration already a challenging policy area.
• U.S. may be called on to respond to
consequences in parts of the world less
prepared to mitigate consequences.
– Will most of it fall on DoD, or will there be a
‘whole of government’ response?
Resource wars
• U.S. not directly threatened by resource wars.
• Indirect threats include:
– Supply-side shocks from conflicts.
– Human security concerns.
– ‘Duty to protect’ interventions.
• E.g. Libya
– China policies in developing world as it pursues its
own energy security.
• Future interventions or wars?
• Supply arms to conflict states?
• Ignore poor governance?
Challenges
• Protect market-based approach to energy.
• Protect investment climate for energy.
– Capital-intensive industry.
• Pursue diversification of energy sources.
• Promote energy efficiency as alternative
‘source’ to meet rising demand.
– China and India are again crucial due to
combination of population and economic growth.
Challenges
• Incorporate India and China into integrated
global energy market.
– China and India are largest new consumers.
• Both have a history of state-centered, non-market, and
bilateral approaches to economics and trade.
• Arrive at understanding with China about
future of energy markets and security.
– Rising power: bring it into status quo or risk it
becoming a challenger?
Challenges
• Protect energy lines of communication.
– Some estimates say 50% of oil exports projected
to pass through Straits of Hormuz by 2030.
• Prevent energy supplies from falling under
control of single state in Middle East?
– Little discussed possible consequence of Iran
nuclear program.
• Prevent instability in Saudi Arabia?
– How do we handle this? Do we even want to get
involved?