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7 the national bureau of asian research nbr special report #41 | september 2012 JOHN V. MITCHELL is an Associate Research Fellow at Chatham House and a Research Adviser at the Oxford Institute of Energy Studies. He can be reached at . Asia’s New Role in Global Energy Security John V. Mitchell EXECUTIVE SUMMARY This essay examines key changes in global trade and investment in oil within an energy security context and outlines implications for the security of global supplies and the U.S. MAIN ARGUMENT U.S. energy security is a mixture of rhetoric, support for market-based international and domestic solutions, and the capacity to intervene militarily to protect sources of supply to the international markets when normal trade breaks down. The rough self-sufficiency now foreseen for U.S. gas supplies is not replicated for oil. Although the U.S. is expected to be less dependent on oil imports in coming years, it cannot isolate itself from the security problems of the global oil market that affect its trading partners. Most importantly, the global oil balance is changing. Asian dependence on the Middle East is replacing U.S. and European dependence as the key question in global energy security. Asian companies also compete with U.S. and European buyers and investors for imports from exporters who are logistically more or less equidistant from them. These new “swing” suppliers are eastern Siberia, Kazakhstan, northern Iraq, and the exporting countries of the middle and south Atlantic: Nigeria, Angola, and Brazil. The governments who control the resources of these countries seek investment and markets to diversify their economies. Because of their state ownership, many Asian importing companies can respond by deploying support from other state-controlled companies and financial institutions for non-oil developments. POLICY IMPLICATIONS Given this changing global oil balance, the U.S. must prioritize the following policy objectives: • Attend more explicitly to global, rather than faux-independent, U.S. energy security • Contribute to broad economic development in the swing exporting countries • Seek Asian cooperation for energy security, particularly for handling disruptions and developing open and competitive markets for trade and investment • Prepare for “fail-safe” military protection of the stability of the swing exporting countries • Involve Asian countries in the protection of Middle East stability and export routes, which the U.S. currently provides 9 ASIA’S NEW ROLE IN GLOBAL ENERGY SECURITY u MITCHELL A lthough every government and policy adviser thinks first of national energy security, few would argue that it can be separated from a global perspective on energy security. The degree of interdependence in trade and investment is such that insecurities in one country will have effects on others. This is most obvious in the case of oil prices. It is difficult to imagine today that any significant oil-trading country could effectively separate its domestic pricing system from international prices: those countries that do so, normally oil exporters, face great difficulties from the distortion of markets that results. In a country like the United States, which is both a producer and an importer, an attempt to separate domestic from external prices would lead to multiple pricing systems, immense bureaucratic costs, and internal distortions similar to those that occurred during the 1970s when price controls were applied to domestic oil production. The analysis below starts with the perspective that isolation is impossible. The first section defines the key elements of global energy security, while the second section describes the conventional U.S. position on energy security. The following section then analyzes recent changes in global trade and investment in oil and examines current projections. The essay concludes by discussing some of the implications of these changes for the security of oil supplies globally, as well as for the United States in particular. Global Energy Security It has proved difficult in policy discussions and in the literature to define “energy security” in a simple way. The question has to be addressed through the lens of a compound eye that looks at insecurities for parts of the economy and society outside the energy sector, as well as the traditional, question-begging formula of “adequate supplies at affordable costs.” There are three aspects of energy security that have proved useful in discussions in the United Kingdom and are familiar in the United States: security from physical disruptions of supply, security from economic damage, and security from geopolitical crises.1 These will be discussed below. Security from Physical Disruptions of Supply Physical disruptions of supply include disruptions due...

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Additional Information

ISBN
9780981890463
MARC Record
OCLC
868216786
Pages
65
Launched on MUSE
2014-01-01
Language
English
Open Access
No
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