To Have and Have Not: Energy Security vs Energy Independence in a World Awash in Cheap Oil

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February 24, 2016

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by Jim Lane (Biofuels Digest) The following slides and comments are excerpted and expanded from remarks by Digest editor & publisher Jim Lane at the Energy Security Breakfast at ABLC 2016, held last week in Washington.

The premise I’d like to explore today is a simple one to describe, and oft-heard around Washington these days.

We live in a world awash in low-cost oil and natural gas, electric cars have arrived, OPEC is in tatters, so we don’t need to focus on energy security anymore.

And let’s examine comments made this week by US Pacific Forces commander Admiral Harry Harris. When asked during a hearing this week by the Senate Armed Forces Committee whether China was “militarizing the South China Sea,” he replied: “You have to believe in a flat earth to think otherwise. I believe China seeks hegemony in East Asia.”

US Secretary of State John Kerry, in separate testimony, told the Senate Foreign Relations Committee that the US is “encouraging the peaceful resolution of competing maritime claims in the South China Sea – a goal that is definitely not helped by the militarization of facilities in that region.”

Let’s investigate those themes, and the state of the world economy as a threat multiplier, and diversified energy supplies as a force multiplier — in the context of how energy competition, and energy isolationism — can lead to ruinous war.

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Here’s an old slide from 1941. When we think of 1941 we generally think of December 7th. But what caused, in a proximate way, the events of that day? Here’s a headline from The Mercury which tells that tale. It’s an oil embargo, led by the United States on the premise that aggression in Asia represented a “threat to America”.

As Jörg Friendichs wrote in Energy Policy in 2010:

“When an American oil embargo became imminent, in 1941, Japan preemptively attacked the US Naval Base at Pearl Harbor and radicalized its war of conquest in order to gain access to the rich oil supplies of the East Indies.”

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The trade in petroleum is dollarized, and that means that when the price of oil has fallen more 50 percent in past two years, we feel that impact directly in the United States. But in currencies that have fallen 30 percent or more against the US dollar, there is hardly any change in the price of energy at all, and that changes the balance of world trade, and changes the nature of economic opportunity around the globe for every single person. And it challenges the idea that you are economically free, because the price of oil is controlled not by markets but by a cartel.

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Not every single oil field in the world is controlled by friendly allies, and if you’ve heard of a group called Islamic State— which as Mike Breen of the Truman Security Project points out is not particularly Islamic and not a state — this slide shows late last year shows the state of oil field ownership in a global hot spot. These are not held by friendly guys, but by some very scary people, and they sell that oil at a discount to fund operations that are not designed with your benefit in mind.

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Especially since the US does not import very much oil through the Strait of Hormuz; the vast majority of our domestic supply comes from the US, Canada, Mexico and Venezuela. Oil through the Strait does not generally flow west to the Americas, but East towards China. It’s a very, very important trade that drives the world economy.

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Here’s the Pacific, and it’s a world of insufficient fossil energy supply. The growth of nations in this region — and growth they should have — what’s wrong with Asian nations doing well? They and we ought to encourage economic growth and the stability that flows from it. But they are short on energy, energy drives economies forward, and they are getting it mostly from the Middle East.

Now, they have abundant renewable resources. So stabilization in the Asia-Pacific region, and this is my thesis, will flow from stable economic growth, and that comes from accessing these abundant renewable resources.

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... an area of real opportunity and abundant renewable resources, if we get it right, but if we get it wrong, it become a region of abundant risk. Just risk, doesn’t mean it’s bad, it’s risky.

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There are some deployments taking place in the South China Sea, and here you see the distances of these build-ups and air strips to air bases on the China mainland, being constructed by a nation which is very dependent on the crude oil and gas flows through the region.

Why? Naturally they want to secure energy supply.

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So I ask you to separate those two terms (energy security and energy independence) in your mind, and to remember that every nation has a right to secure access to the energy it needs for the economy it can build. But what every nation would benefit from is a sustainable, domestic source of energy, and not one that flowed through international waters such as the South China Sea.

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What’s going to replace coal (in China)? If it is not going to be from renewables it will have to be from non-renewables, because Asia is short on fossil energy supplies as we have seen, and that means more pressure piling up on the trade flows through th South China Sea.

The tension will escalate, and escalate, until we have sustainable energy for all. It is inevitable, and there is nothing that can be done about it except build sustainable domestic sources of energy for countries around the world, or condemn them to economic misery they will not thank you for and which will destabilize their politics and radicalize their young as we have seen from the Middle East to Greece.

The path forward is not energy for some, or sustainable energy for some, but sustainable energy for all. That is the path to prosperity and the peace that flows from it.

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But increasing our dependence on any resource which is found unevenly around the world — whether it is rare metals or energy liquids — make the world economy dependent on precarious trade flows, and divide the world into haves and have-nots. This is not a trade in cars, or consumer electronics. This is a trade in energy, the blood of an economy.

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If we are to escape the cycles of history we might strive harder to change the conditions that lead to oil wars, and that means getting off the dope. Now. Everywhere. In spite of some inconvenience at the pump. READ MORE / MORE