What 'Energy Security' Really Means

By Sebastian MallabyMonday, July 3, 2006; A21
At their annual gathering each summer, the leaders of the rich world promise to fix some pressing global problem -- and usually fail to deliver. This month's Group of Eight summit in Russia takes statecraft to a whole new level. Global leaders have "energy security" on the agenda. But judging by what they say and do, they don't always understand the subject.
For many American leaders, energy security means producing energy at home and relying less on foreigners. But the United States imports three-fifths of its oil, and the share is heading up. For the foreseeable future, alternative fuel is unlikely to change that.
For China, which isn't part of the G-8 but participates in some of its meetings, energy security means buying stakes in foreign oil fields -- in Sudan, Nigeria, Angola and so on. But this doesn't make China any more secure. If a geopolitical crisis broke out, China's tankers might be blocked on the high seas; owning chunks of Africa's oil wouldn't make much difference. In the absence of a crisis, African investments make little more sense: China can buy oil on the world market.
For Russia, which pushed energy onto the G-8 agenda, energy security has yet a third meaning: restrictions on foreign investment in domestic oil and gas fields. But this is the mirror image of the Chinese mistake. Just as China's security isn't boosted by owning African resources, Russia's security isn't reduced by allowing foreigners to own Russian ones. In a crisis, Russia would control its oil fields by military force. Short of a crisis it can extract taxes and royalties from foreign energy firms just as it can from Russian ones.
So there's no sense in these nationalistic conceptions of energy security. As Daniel Yergin has written recently in Foreign Affairs, real energy security requires setting aside the pipe dream of energy independence and embracing interdependence.
Energy interdependence can actually be good for energy security: Just look at natural gas markets. Right now nearly all the natural gas that Americans consume comes from U.S. and Canadian fields; only 3 percent comes into the country by tanker in the form of liquefied natural gas. This renders the United States highly vulnerable to disruptions on its home continent. If terrorists or a hurricane took out a key pipeline, it would be hard to bring in alternative supplies from outside North America, and prices would spike upward. By buying more liquefied natural gas from a diverse range of foreigners, the United States would reduce its energy independence but enhance its energy security.
For different reasons, the oil market also shows why leaders should embrace interdependence. Because oil is traded globally, a supply disruption anywhere will affect gas prices in the United States; there's no use thinking nationalistically. If there's an explosion in a Chinese oil field that serves Chinese consumers, it will force the Chinese to buy more oil on the world market and so drive up the global price: American motorists will suffer. So China's energy security is not in competition with U.S. energy security, as the resource-scramble model would suggest. China's energy security is part of U.S. energy security.
Equally, there's a lot of breast-beating about the U.S. strategic oil reserve. The idea of vast bunkers full of crude conjures pleasing feelings of national self-sufficiency: The heck with those foreigners, we can take care of ourselves! But this is mostly a delusion. If the United States releases oil from its reserve, the benefit is dissipated around the world since the global oil price is affected. To have a serious impact on that price, the United States needs Europe and the advanced Asian countries to release oil from their stockpiles in a concerted way: Far from being a tool of national self-sufficiency, strategic oil reserves are a classic multilateral instrument. There's an urgent need to bring the big emerging economies into the International Energy Agency, which coordinates the reserves held by the rich countries.
What about U.S. relations with energy suppliers ; surely here the model of nationalistic competition is relevant? The Arab oil embargo of 1973 demonstrated the danger of a conflict between suppliers and consumers, and Russia's withholding of natural gas from Ukraine last winter shows that embargoes remain possible. But suppliers know that strong-arm tactics are the surest way to accelerate the search for alternative fuels, which is why Russia plays politics with energy more by giving out subsidized supplies than by refusing to sell any. The threat of an embargo by oil states is therefore smaller than the threat of violence by non-states -- rebel attacks in Nigeria's oil delta, an al-Qaeda strike in Saudi Arabia. In this sense the energy security of producers is not in competition with that of consumers. They are interdependent.
If the G-8 summit can spread the word about this interdependence, it will do some good. But the nationalistic conception of energy security is worse than useless. By encouraging a competitive scramble for resources that could spiral into conflict, this sort of security talk only creates insecurity.