The changing picture of energy security by Larissa Basso

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Energy security has always been a key issue in foreign policy. Since the discovery of fossil fuels and their dissemination as energy sources, security of energy supply has been guaranteed by the ownership of large reserves of fossil fuels or by alliances with countries that possessed them. Recently, the world is experiencing a transition in the energy arena, however. Different actors have emerged as relevant players in oil and gas production; new technology has allowed other energy sources to be exploited and are becoming more and more cost-competitive; and overlapping issues have been added to the picture. Maintaining energy security has become much more complex.

The world is still highly dependent on fossil fuels: they provided 81.4% of global Total Primary Energy Supply in 2013 (IEA, 2015). Large oil producers whose reserves are easily reached and thus produce at a lower price still have comparative advantage in the energy market. But decades of high oil prices, resulting, mostly from controls by Organization of the Petroleum Exporting Countries (OPEC), have turned the exploitation of unconventional oil sources into a cost-efficient business. More producers have joined the oil market; the US shale production, due to its scale, has decisively changed market dynamics.

Global oil prices are now a lot lower than they used to be because great producers – especially Saudi Arabia – decided that they want to take their market share back. They know that, in the long run, unconventional oil production cannot compete with their cheaper oil production. Yet, these countries are facing budgetary constraints due to lower oil prices, and it is uncertain if they could tolerate deficits much longer. And at the same time, it seems that shale oil and gas could become cheaper in the future due to further improvements in technology.

Social and environmental impacts of energy are also catalyzing change. Pollution records in different parts of the world have increased demand for cleaner electricity and fuel. Renewables are gaining space. These sources of energy – solar; wind; hydro; geothermal – are available locally and contribute to reduce energy dependency of countries that do not possess fossil fuel reserves. However, performance rates and intermittency are important issues. There is a global race in renewable energy technology; storage, in particular, is one of the areas in which gains from innovation are the most promising. But because renewables still require backup systems – usually provided by fossil fuels – they are not yet game changers in the geopolitics of energy.

But they might become, if climate policies become more stringent. At COP 21, in Paris 2015, UNFCCC members have agreed to a limit of 1.5ºC in long-term average global temperature increase. However, their combined Intended Nationally Determined Contributions (INDCs) – in which each country specify which climate change mitigation and adaptation measures will be undertaken – do not guarantee it: even if all measures detailed are implemented, average global temperature would rise by 2.7ºC (UNFCCC, 2016; Climate Action Tracker, 2015). If countries become more serious about climate change mitigation, around 80% of unused fossil fuels need to remain on ground (McGlade & Ekins, 2015). In this scenario, energy systems will need to become much more efficient and to rely a lot more on renewables.

Although this is currently still only a scenario – it will hardly become true if carbon pricing not is established and at a level that truly internalizes the impact of fossil fuels on climate – it would mean a major shift in the geopolitics of energy. Security of supply would still be crucial to any economy, but its meaning would change: in addition to reliability and affordability, sustainability would complete the energy security triplet. Low carbon energy technology would become a strategic asset in foreign policy and alliances could be built around renewable energy development. This would emphasize the 4th Industrial Revolution that is already underway: global power is more and more detached from to the ownership of resources and more and more attached to innovation.

In summary, energy security has been, and will continue to be, a national priority. But both its meaning and the means to obtain it are changing. The global economy is still very dependent on fossil fuels, and producers that can supply them at lower prices still have comparative advantage. But they are losing space to unconventional oil and gas. Renewables would become contenders if envisioned technology gains take place, especially if a global carbon price is established. The energy market is becoming much more dynamic, and this is not a temporary feature: it is the trend for the future. And in any dynamic situation, having knowledge is more relevant than owning resources. In the 21st Century, therefore, security of energy supply is intrinsically connected with innovation, and alliances to develop technology seem to be the best investment a country can make to guarantee energy security in the near future.

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References:

Climate Action Tracker (2015): 2.7ºC is not enough – we can get lower. Available at <http://climateactiontracker.org/assets/publications/briefing_papers/CAT_Temp_Update_COP21.pd>, access 29 Aug 2016.

International Energy Agency IEA (2015): Key World Energy Statistics. Available at <https://www.iea.org/publications/freepublications/publication/KeyWorld_Statistics_2015.pdf>, access 29 Aug 2016.

McGlade, Christophe and Ekins, Paul (2015): ‘The geographical distribution of fossil fuels unused when limiting global warming to 2ºC’. Nature, v. 517, p. 187-202.

UNFCCC (2016): Aggregate effect of the intended nationally determined contributions: an update. Available at <http://unfccc.int/resource/docs/2016/cop22/eng/02.pdf>, access 29 Aug 2016.

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ERRATA

On our column published in 19 Aug 2016, where it reads “[…] the Trust and 07 children won the case against the Oregon Department of Ecology […]” it should read “[…] the Trust and 07 children won the case against the Washington Department of Ecology […]”. We thank Curtis Morrison, from Our Children Trust, for the correction.

Larissa Basso is a PhD Candidate and member of the International System at the Anthropocene and Climate Change Research Network at the Institute of International Relations of University of Brasília as well as a Visiting Scholar at University of California San Diego, School of Global Policy and Strategy. Contact: <larissabasso@gmail.com>

Como citar este artigo:

Editoria Mundorama. "The changing picture of energy security by Larissa Basso". Mundorama - Revista de Divulgação Científica em Relações Internacionais, [acessado em 18/10/2016]. Disponível em: <http://www.mundorama.net/2016/10/18/the-new-geopolitics-of-energy-by-larissa-basso/>.

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