What is the energy security problem?
by John Mitchell
International Journal of Global Energy Issues (IJGEI), Vol. 6, No. 6, 1994

Abstract: The geography of energy resources and industrial development inevitably means trade between the countries which have resources and the countries with industrial requirements. There is no possible scenario which excludes massive energy imports to Europe, the US, and North East Asia; exports from the Middle East to the world oil market, and imports of gas from Russia to Europe. There are no feasible regional opt-outs from this interdependence. It is not possible to construct plausible 'energy enclaves' for the Western Hemisphere, or Europe-plus-Russia, or North East Asia, which could avoid large imports from the world oil market. Energy trade has benefits for both parties: energy imports supply energy to consumers at prices lower than any alternative energy system can offer. Energy exports provide markets for resources which exporters could not themselves consume, giving them income levels higher than they could otherwise achieve and in some cases regional political influence which they could not otherwise afford. The benefits of the trading and investment relationship are accompanied by risks on both sides. The important question is not whether interdependence is increasing (since that cannot be avoided at reasonable cost), but whether the risks are increasing or decreasing and what can be done to mitigate the different kinds of risk beyond normal commercial risk. Disruptions of supply can be alleviated by strategic stocks and the IEA sharing mechanisms. The threat of economic damage from cartel pricing is much weaker than it seemed in the 1970's, and can be reduced by co-operation between importers and exporters.

Online publication date: Thu, 17-Jul-2014

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