IEEJ: January 2011

Special Bulletin
A Japanese Perspective on the International Energy Landscape (25)

December 28, 2010

A Review of the International Energy Landscape in 2010
Ken Koyama, PhD
Director
Strategy and Industry Research Unit
Institute of Energy Economics, Japan

The international energy landscape in 2010 saw various events and challenges that shook
the world. At the end of 2010, I would like to review the year’s international energy landscape andmake comments on six major topics that attracted particular attention.
First, crude oil prices remained in a “range-bound” movement for most of the year beforerising beyond the upper range of the bound late in the year. Behind the change have been massivemoney inflows into the oil futures market under quantitative monetary easing in the United Statesand other countries. The recent crude oil price hikes have thus featured the effects of financial
factors. Optimism for the avoidance of a double-dip recession late in the year and the cold waves in
Europe and the United States might have also contributed to boosting crude oil prices. In the year
2010, the international oil market further deepened its close link with the world economy andinternational financial markets.
Second, the year 2010 saw an unprecedented global rise in expectations for growing roleand importance of natural gas. The International Energy Agency’s World Energy Outlook 2010 used
the words “a golden era” to describe expectations and prospects on gas. The most influential driverof the expectations has been the so-called “shale gas revolution” that has originated from the UnitedStates. But the focus of attention has shifted to how the impact and spillover effects of the revolution
would spread from the United States to European and Asian markets. The year 2010 featured theimpact of the revolution that began to not only influence the natural gas market but also to affect thefuture course of other energy sources including oil, coal, nuclear and renewable energies that arecompeting with natural gas.
Third, the year saw various challenges surfacing with such non-fossil energy sources as
nuclear and renewable energies that had been considered as increasingly important energy sources toaddress energy security and climate change. While natural gas has demonstrated its advantages
including abundant resources, relative economic competitiveness, stable supply and high socialacceptability, the future course of the U.S. “Nuclear Renaissance” has grown more uncertain.

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IEEJ: January 2011

Concerns have also emerged about the future deployment of costlier renewable energies.
Contributors to these situation may include a prolonged economic slump particularly in industrial
countries and growing uncertainties of global warming negotiations as described later. In contrast toindustrial countries, new markets, including such emerging countries as China and India, and Middle
East oil producing nations, have become the leading driver of the nuclear and renewable energy
market expansion. As seen typically in the nuclear energy area, international business competition
has grown more intensified in the expanding “new markets”, which include Vietnam and other
Southeast Asian countries, as well as Middle Eastern nations such as Saudi Arabia, Jordan andTurkey. While major global players competed for nuclear business opportunities in 2010, responses
to more important international problems including nuclear security and safety as well as nuclear
non-proliferation surfaced as key challenges.
Fourth, China became a focus of attention regarding international energy challeges in 2010.
while the influences and presence of emerging countries as a whole increased further. While it wasalmost impossible to find any area free from the rise of China in international politics and the world
economy, Chinese moves, including growing energy demand, rising dependence on energy imports
and aggressive resources diplomacy, grabbed energy news “headlines” in 2010. As symbolized by
the rare earth problem as well, China’s developments and its assertive diplomacy or posture attracted
the most attention in the world in the year.
Fifth, the United States saw various difficulties in the year in contrast to China as a risingpower. The United States remained plagued with a prolonged economic slump, high unemployment
and damaged balances sheets problems in 2010, although economic sentiment rose toward the end of
the year on rising stock prices with double-dip economic slowdown fears fading away. Althoughmidterm Congressional election results have tended to be unfavorable for the ruling administration,
the midterm election results in November 2010 were severe for the Obama Administration. Its
political management has been forced to address a new domestic political environment including theRepublican-dominated House of Representatives (and the abovementioned economic environment).
In diplomacy, the United States in the year faced new challenges including East Asian problems suchas growing tensions on the Korean Peninsula and China’s rise, in addition to problems regarding
Middle East countries such as Afghanistan and Iran.
Sixth, international talks on a new framework to address global warming might havedecelerated in 2010 as relevant international moves and responses had to face numerous difficultiesand challenges. At the 16th Conference of the Parties to the U.N. Framework Convention on Climate
Change, known as COP 16, participants produced the Cancun Agreement, maintaining themomentum of negotiations in a run-up to the COP 17 conference while leaving many important
problems pending. This means that future international negotiations will grow even more important.
In the absence of global governance amid great uncertainties over the future course of the world2

IEEJ: January 2011

economy and amid industrial countries’ decline and emerging countries’ rise in international politics,
global warming negotiations may naturally have to slow down for adjustments to prevent any
decisive confrontation or any breakdown of talks.
The six topics cited above represented key issues of the international energy landscape in2010. How these issues would change in 2011 may be very important for anticipating the future
landscape. New issues other than these problems may characterize the international energy landscapein and after 2011. I would like to continuously analyze the international energy landscape fromvariousanglesor

viewpoints,

toimplement

IEEJ’smissionof“Considering

theEnergy-Environmental Issues of Japan and Asia form a Global Perspective and Proposing PolicySolutions.”.
Contact: report@tky.ieej.or.jp

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