IIPS
Institute forInternational Policy Studies•
IIPS Policy Paper 282E
January 2002

The Historical Flow of Black Gold:
Two Approaches to Energy Security

YUJI NAKAMURAINSTITUTE FOR INTERNATIONAL POLICY STUDIESThe Institute for International Policy Studies was establishedin June 1988 as an independent research center. In cooperation with other domestic and international research organizations, IIPS examines global security, economic, andenvironmental issues, and proposes policies to address
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Institute for International Policy Studies 2002

IIPS Policy Paper 282E
January 2002

The Historical Flow of Black Gold:
Two Approaches to Energy Security

YUJI NAKAMURA

Contents
Oil Markets and International Relations
Approaches to energy security
Market Analysis Approach
Geopolitical Approach
Medium to long term prospects of the oil market
IEA Long Term Forecast
Major Issues
1. Structural Problems
2. Probability of a New Oil Crisis
3. US Energy Strategy
4. China’s Energy Strategy
5. East Asia Energy Network
Conclusion
Appendix 1
Notes and reference

The Historical Flow of Black Gold:
Two approaches to energy security

YUJI NAKAMURA

More regulation, or less, this is the dilemma facing policymakers in the energy industry.
Energy is essential for economic growth and national security, which in turn increases
demand for energy. Thus, maintaining a reliable affordable source is often a political aswell as a purely commercial decision. The attacks of September 11 and the subsequent US
campaign against terrorism, the escalation of tensions in the Middle East and South Asia,
the uncertainty in the US and Japanese economies which have the potential to reverberatearound the world, the commitment to the Kyoto Protocol and the collapse of the energy
giant Enron, have all served to highlight energy issues. In Japan, after the first main phase
was introduced in 2000, the second main phase of deregulation is expected sometime inliberalizing the energy industry is of special interest. In the following article, IIPS SeniorResearch Fellow, Yuji Nakamura, traces the post-World War II history of the primary sourceof fuel for the foreseeable future—petroleum—pegging the major events with international
political theory.

The various aspects of energy policy has been the focus of many recent debates: The pros
and cons of nuclear power, of maintaining the Japan National Oil Corporation,

deregulation of the energy market beginning with electricity, and measures to tackle global
warming, have all been subject to the hot gaze of the media.1
There are usually two directly opposing recommendations to any energy policy: one that

advocates greater government participation and the other recommending liberalization.
As is well known, Japan is dependent on foreign sources of energy and, at present, 80
percent of its oil is imported from the spectacularly volatile Middle East. Moreover, September
11 revealed the vulnerability of tankers, both oil and liquefied natural gas (LNG), as well as
nuclear power plants to potential terrorist attacks. In Japan, greater government participation has
been proposed because of the need to protect the weak route of energy supply and the instabilityof the surrounding geopolitical situation. Specific examples include the Sakhalin energy
development in the midst of the northern territories dispute with Russia, the swings in the

IIPS 2002 ♦1

Yuji Nakamura

energy market of China, (which is poised to become an economic leader), and the territorial
disputes in the South China Sea with the associated natural resources.
On the other hand, from the late 1980s, as markets have become more global and economies
increasingly interdependent with the end of the cold war, the industrialized world began to focus
on the supply and demand of energy. Such attention has meant that there are those who promote
greater freedom and relaxing restrictions in the energy markets. This view is held by those who
believe that making the energy industry, as an important infrastructure of an economy, more
efficient will not only increase the global competitiveness of Japan’s industry by reducing thecost of supplying energy, but that supporting market mechanisms and promotinginterdependence will strengthen its energy security.2
In this article, how these two differing positions have developed since the end of World War
II in the midst of changing international trends are examined, concentrating on the oil markets.
Some may query the choice of oil as the subject matter rather than the currently in vogue naturalgas.3 Although the importance and potential of natural gas cannot be dismissed, the role of oil
as the fuel of choice for transportation and therefore, its importance as the primary energy
source, will be maintained for the next 20 years. Figure 1 is a forecast made by the US
government’s Energy Information Administration (EIA) showing global primary energy demandby fuel type up to the year 2020. Even in 2020, the market share of petroleum is expected to be
maintained at around 40 percent despite the replacement of coal by natural gas.

Figure 1—Forecast of global primary energy demand by type

H1 Oil markets and international relations

IIPS 2002 ♦ 2The Historical Flow of Black Gold: Two Approaches to Energy Security

Oil Markets and international relations
Figure 2 shows the changes in regional share that have taken place in the production of oil in the
global market from the end of World War II up to the present, including the International Energy
Agency (IEA) forecasts up to 2020. In table 3, the major events that have had an impact on oil
and oil markets are outlined next to international political events and shifting paradigms. As canbe seen in figure 2, the North American share consistently dropped until the end of the cold war
in 1991. In contrast, the share held by the organization of petroleum exporting countries (OPEC),
the former Soviet Union (FSU), and the North Sea (Europe) had increased. When the major
events in oil and the associated shifts in international politics of each decade are viewed side byside, it is quite revealing. This bird’s eye view of history shows how energy came to beintertwined with international politics as a “strategic product.” Furthermore, the question of how
to market oil as a “commodity” due to the transformation in the oil market is answered.
As shown in figure 2, according to the forecasts made by major organizations such as the
IEA, the market weight of the Middle East is expected to increase. Adding to the concern is thegreater social instability in the Middle East peace process, movements of the conservative wingin Iran, the future of Saddam Hussein in Iraq, and the unemployment levels of young people in
Saudi Arabia. Unfortunately, the Middle East is, and will continue to be, mired in despondencywith no clear solution in sight. Since the mid-1980s, due to the effects of globalization andgreater marketing, oil has been transformed from a “strategic good” into a “commodity.” By
2020, however, OPEC, with most of its members concentrated in the Middle East, will have a
54 percent share of the supply (figure 2), and since oil will still account for 40 percent ofprimary energy (figure 1), it can be seen why countermeasures for the security of the oil supply
is a pressing issue.
Figure 2 and table 3 are historical outlines of the major international political events related
to the economics of oil from the end of World War II to the present day.

World War II
Due to the impact of World War II, oil has been described as “a product which is closely
attached to national strategy, global politics, and power, whose importance has been proven by
the use of the forces of nations, and the United States’ domination of oil played a central role inthe developments and outcome of the war and eventually was the deciding force.”4 As can beseen from figure 2, in the year 1940, the US accounted for 65 percent of the world’s productionof oil. Considering that it had virtual control of the world’s oil supply, it was not surprising that
the US would be victorious in World War II.

IIPS 2002 ♦ 3

Yuji Nakamura(Source) Actual results: PenWell [2000],
Forecast: IEA [2000]

Oil production share by region

70

North America
OPEC
FSU
North sea（％）
60

1. Oil embargo
against Japan

2. First Oil Crisis

3. Second Oil Crisis50

4. Persian Gulf Crisis

40

5. Introduction of market
oriented system

30

Oil Market Transformations
East Asia Instability Theory- China Threat Theory- Increased Middle East
Dependency
New Energy Crisis Theory- Insufficient Investment- Environmental
Agreements

7. Breakup of theSoviet Union

20
6. War in Afghanistan

10
8. Increased North Sea
Production

0
1940

1950

1960

1970

1980

1990

1999

2010

Figure 2 Trends in oil production share by region
Table 3 Challenges to energy security and international political transformation
Period1950s–1960s

IIPS 2002 ♦ 4Core Events

Mainstream
International
Political
Paradigm
Post-World War Balance of Power
TheoryII1948 Hans J.
Cold War
Morgenthau
Politics among
Nations

Major Events
Affecting Oil

Changes in the
Oil Markets

1950s Discovery
of major Middle
East oil fields
1955 USSR
becomes major
oil producer
1959 US import
restrictions
1960 Formationof OPEC

1950s
Age ofdominance of the
major oilcompanies
1960s
Age of OPEC

2020

The Historical Flow of Black Gold: Two Approaches to Energy Security

1970s

Vietnam War(1960–1975)
Limitations ofmilitary force
exposedInterdependence
theory1977
Robert O,
Keohane– Joseph
S. Nye Jr.
Power andInterdependenceWorld System
Theory–Subordination
Theory1980s

Soviet Union
invadesAfghanistan(1979)
Decline ofAmericaHegemony
Stability Theory
1978 Modelsky
Long Term Cycles
of International
Politics andCitizen States
1981
Robert Gilpin
War and Change
in World Politics
Neo-liberalism
1984
Robert O.
Keohane, After
Hegemony
Chaos Theory
1986

1972 The Clubof Rome,The limits togrowth,Depletion of
resources,
environmental
and population
issues1973 First Oil
Shock,
construction ofEuropeanpipeline network
begins

1970s
Age of OPEC
Domination
Resource
Nationalism
Theory1980 Second Oil
Shock
Increased
production in
North Sea
Pipeline Dispute
between US andEurope(1983
Establishment of
NY oil futures
market)(1986
Implementation ofmarket based
pricing system)(Window offragility)

SamuelHuntington, Clashof Civilizations
and the Remakingof World Order

IIPS 2002 ♦ 5

Yuji Nakamura

1990s1989 Persian
Gulf War1991 Collapse ofSoviet Union

Post-cold war
peace between
major countries(America
recovers)
Instability inthird world
Globalization

Realism: Single
Pole Structure andBandwagon
Strategy
Liberal: Peace of
Democracies1993
Bruce Russet
Grasping the
Democratic Peace
GlobalGovernance3-pole Structure
Theory1996
Akihiko Tanaka,
The New
MiddleAges

1991 American
oil production
peaks
1993 China
becomes net
importer
Discovery oflarge oil fields in
Caspian Sea anddebate aboutpipeline route
Attention on
global warming
problem
1999 ExonMobilmerger2001 Bush’s
National Energy
Policy1990s
Theory of Oil
MarketTransformation(commoditization,
globalization)
Theory of East
Asia Instability
1996
Kent Calder,
Pacific Defense:
Arms, Energy, andAmerica’s Futurein Asia
Theory of New
Energy Crisis(Source) Created while referring to Yamamoto [2000].

1950s and 1960s
In the era after World War II, from the 1950s to the 1960s, the United States led the global
economy in international organizations including the international monetary fund (IMF) and thegeneral agreement on trade and tariffs (GATT), backed up by its overwhelming economic
strength in the so-called “Golden Age.”
During and after the war, however, some enormous oil fields had already been discovered in
the Middle East and it was already being predicted that “the center of the world’s oil production
would shift from the Gulf of Mexico and the Caribbean Sea to the Persian Gulf in the Middle
East. This shift would continue until the center completely moved to the Persian Gulf region.”5
In actual fact, this prediction came true and, as shown in figure 2, the title of the world’s energy
supply was transferred from North America to the Middle East as early as the first half of the
1960s.
In international politics, these were the years of the East-West confrontation and thedominating political theory was one of a balance of power (realism), as espoused byMorgenthau. Despite the East-West standoff, new movements were being formed, and theeconomic union of Europe was launched, starting with the Rome Treaty in 1958. Although at
the time, this was only a Western trend, the theory of union, which provided the ideologicalbackground, was the seed for what was to later evolve into the interdependence theory.6 The US
economy was beginning to slide from it’s paramount position, whilst other countries saw hugeeconomic growth. In addition, this was the era of development in global trade, which was

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The Historical Flow of Black Gold: Two Approaches to Energy Security

undoubtedly propelled by the huge growth in Middle East production of oil.
As one of the two superpowers during the cold war, the Soviet Union, under its planned
economy of the 1950s, dramatically increased its production of oil so that within 10 years by
1960 it had doubled its share of world production to 16 percent. That oil was practically given
away to the neighboring Council for Mutual Economic Assistance (COMECON) countries,
which became satellite nations. As already mentioned, the Middle East overtook North
American production in the first half of the 1960s, but even before that in 1959, the US
domestic oil industry was being affected by the flow of cheaper imported crude oil from that
region. As a result, a temporary import ban was imposed. In the early 1950s, with thenationalization of oil industry in Iran, the major American and European producers, dubbed theSeven Sisters, began to lose their grip on the power and control of oil markets which began toshift to the oil producing countries. This was epitomized by the formation of OPEC in 1960,
which symbolized the growing dominance of the new Middle East oil producing countries.

1970s
The 1970s was a time when oil and finance propelled the world even further forward. The
United States could see no way out of its involvement in Vietnam which had begun in 1969, andthey were defeated in 1975, exposing the limitations of military force at solving international
disputes. In 1971, the international financial system was drastically shaken by the US stopping
the conversion of gold and dollars (the Nixon shock). The first oil crisis in 1973, which took
place during the pessimistic environment after the announcement of growth limitations by theClub of Rome in 1972 (the result of the Resource Depletion Theory), brought stagflation to theeconomies of the developed countries. This proved that oil could be used as a “non-military
weapon,” and definitively meant dominance of the oil markets had moved from the US to
OPEC. With economic problems causing friction in international relations and the loss of US
clout, the interdependence theory began to make its mark with the publication of Power andInterdependence by its two proponents, Robert O. Keohane and Joseph S. Nye Jr. in 1977.2

1980s
In 1979, the USSR’s share of oil production exceeded that of North America (figure 2). This
was the same time as the USSR’s military invasion of Afghanistan, and concern over therepercussions of the US’ slip from its supreme position began to take a serious turn. In 1981, thesecond oil crisis took place and the world economy was once again on the verge of collapse.
Aided by increased production from the North Sea oil fields that had been discovered in the
1970s, Europe started to become more regionally self sufficient. Europe also began to actively
promote the use of natural gas, and began a full-scale importation of natural gas from western

IIPS 2002 ♦ 7

Yuji Nakamura

Siberia, home of the world’s largest natural gas deposits. In contrast, this was the time of the US
administration’s debates on the “window of fragility” of the soviet military. Hardly surprisingly,
therefore, the Reagan administration firmly opposed western European reliance on energy
supplied by the Soviet Union arguing that it lessened Europe’s security. Europe begged to differ
and this disagreement led to the “pipeline dispute.” The result was contrary to US aspirations. It
was during this period that policy toward the Soviet Union began to diverge with the US
pursuing a strategy of containment whilst Europe tried one of engagement. In economics, the1980s was the era of Reaganomics followed with equal enthusiasm by Japan, the US, and theUK. In foreign policy, conservatism was the order of the day against the background of arenewed cold war. Ironically, realism became popular in international politics as the US lost its
ascendancy, and attention was placed on hegemony stability theory presented by Gilpin andModelsky.
Events in the mid-1980s were to start a new age in the oil markets: In 1983, the oil futures
market was established in the New York commodity market. By 1986, a market oriented pricing
system had been introduced for oil transactions. Also, as can be seen in table 4, the system ofpricing crude oil for long term fixed transactions between governments, (controlled by OPEC),
was changed where the price was determined by the movement of spot pricing of crude oilmarket markers such as WTI and Brent. This was because the dominance of OPEC, which had
been an incredibly strong organization in the 1970s, was being slowly eroded away because by
the operation of non-OPEC regions like the North Sea. The events of 1985 were to symbolize abreaking point between eras as US oil production, which had been losing market share eversince the end of World War II, peaked and production fell even further. Thus, oil became less of
a “strategic good” and more of a “commodity” as part of the progress from increased marketingand globalization.

Table 4 Changes in the system to determine crude oil pricing
Price Determinator

Price Determination
MethodFixed Pricing Method OPEC
Government sales
price(– 1986)
Market Based Method Market
Market based method(1987–)
Px = Pm ± a
Px = Crude oil export
price
Pm = Spot price formarker crude oil
a = Adjustment factor(Source: The Institute of Energy Economics, Japan)

IIPS 2002 ♦ 8Transaction PriceLong term fixedpricing
Price of long-term
contract shifts
according to the spot
price of marker crudeoils, and the spottransaction price isalso determined.

The Historical Flow of Black Gold: Two Approaches to Energy Security

1990s
The end of the Gulf War7 which started in 1989 eliminated the nightmare of Saddam Hussein
controlling 20 percent of oil produced by OPEC and having an influence on 65 percent of theworld’s oil reserves held by the organization, 65 percent of the world’s known oil reserves. Twoyears later, the breakup of the USSR saw the end of over 40 years of cold war. In the USSR,
various political and economic reforms had taken place since 1985 when Gorbachev took over
but the oil industry, which obviously had been run by the state, was strained. Thus, despite theabundant domestic oil reserves, production fell from the 1980s and continued to fall until theend of the twentieth century.8 In contrast to the decline in the Soviet Union, China, which had
been an oil exporting country, has become a net oil importing country (figure 5) since 1993
because of the surge in demand from the fast economic growth of around 7 percent, and this hascreated a new player in the international oil market. The oil market is going through anothermajor change. As China seeks an alternative oil supply and challenges the current regime, they
could use their navy to defend sea routes. Their insistence on rights in the South China Sea inorder to secure natural resources is a source of growing concern as a source of instability. On theother hand, the optimistic view would have it that with increased dependency on a foreignsource of energy, the Chinese government would have to be sensitive to the internationalsituation because they would be more dependent on the cooperation of the international
community.
The former Soviet Union started a new route centered on Russia and based on the
Commonwealth of Independent States (CIS). The discovery of large oil fields in the CaspianSea9 led to several proposals for pipeline routes to transport that oil. Whether to pass throughRussia or to secure a transportation route to China started a new round of wrangling among
Russia, China, and the United States in a “New Great Game.” As can be seen from figure 6,
there are four possible options for a transportation route from the Caspian Sea oil fields:(1) Northern route: Use the existing pipeline web within Russia.
(2) Western route: Construct a pipeline to the Ceyhan shipping port on the Mediterranean
Sea in Turkey.
(3) Southern route: Build a pipeline through Iran to the Persian Gulf, or build a pipeline
through Afghanistan and Pakistan to the Indian Ocean in order to avoid the bottleneckat the Straits of Hormuz.
(4) Eastern route: Build a pipeline to export to China.
The cost of building a new pipeline is close to $3 billion regardless of the option selected.
The issue of feasibility of the project meant that securing funding was difficult. Using Russia’s

IIPS 2002 ♦ 9

Yuji Nakamura

existing pipeline would be the most economical, but the nations from the Former Soviet Union
who border the Caspian Sea disapprove and the US is also against the scheme. Therefore,
although oil appears to have become a commodity from a strategic product, the wrangling
between the major nations over the transportation route from the Caspian Sea shows that oil stillretains many characteristics of a “strategic product.”Figure 5

Forecast of China’s Oil Purchases―Domestic Production and Net Import of Oil―
unit: 1 million B/D

Net import

IIPS 2002 ♦ 10

Domestic Production(Source: IEA)

The Historical Flow of Black Gold: Two Approaches to Energy Security

Figure 6—Caspian Sea oil transportation routes

Source: Additions made to Tadashi Miyata [1999]

Twenty-first century
In the immediate aftermath of September 11, in the greatest shock yet of the twenty-first century,
there was mild anticipation that the US would take the opportunity to reverse her unilateralist
policies. At this point in time, this has not been translated into reality by the Bush administration
who have taken a cavalier attitude on international cooperation. Vice-President Dick Cheneyannounced a new energy policy on 16 May 2001, but the strategy was not to promote a
reevaluation of the lifestyle of the world’s largest consumer of energy. Rather, the emphasis wason how to secure a supply of energy for the US.10 The development of the Alaska National
Wildlife Refuge (ANWR) and nuclear generated electricity put the national interests of America
above that of international cooperation. After the terrorist attacks there was no immediate
movement to reevaluate this policy, but changes can be expected once debate in Congress starts.
For the moment, as of 18 April 2002, Congress shelved the ANWR development project.
The instability in the Middle East was confirmed by the simultaneous terrorist attacks. By
2020 however, according to predictions by major organizations like the International Energy
Agency (IEA), the severity of this situation is likely to grow as the dependency of the global
economy on Middle East oil will be even greater than at present, as shown in figure 2.
According to the IEA forecasts, oil is expected to continue to maintain its lead role as the fuel

IIPS 2002 ♦ 11

Yuji Nakamura

for transportation for many years, and if that is true, there are concerns that oil will once again
become a pawn of international politics as a “strategic product.”

Approaches to energy security
We have taken a general view of the relationship between energy issues and the changes ininternational politics that have taken place since the end of World War II. Thus, just as there is atension between realism and liberalism in international politics, there are basically two major
approaches towards energy, which are the market analysis approach and the geopolitical
approach.3 Energy is primarily represented by oil, and the approach based on the market isnatural. This approach in particular has received a lot of attention because of the recent trend
towards globalization. Oil as a tool of strategy is not limited to history as shown by the recent
Caspian Sea resource dispute. Therefore, in debates on energy security the geopolitical approach,where the pursuit of national interest is a priority, is becoming more important.
Within each of these approaches are arguments based on region, the field of energy, and thetime period. The characteristics of these two approaches have been summarized focusing on
Asian energy security and the case of Japan.11

Market analysis approach
1. Economic focus, faith in market mechanisms, suspicions of government
intervention in the market
The Japanese economy is more dependent on international oil markets rather than on Middle
East oil. Those analysts who are still fixated on Japan’s own development of oil have notsufficiently taken into account the globalization and deregulation that has taken place in the oilmarket since the middle of the 1980s. The so-called Asian Premium, a roughly 10 percent FOB
price difference for Middle Eastern crude oil headed for the US and Europe versus that headed
for Japan, (figure 7) was part of the reason for the importance Japan placed on developing her
own oil sources. However, the real reason that Japan was burdened with this premium was that
there was no transparent and restriction-free oil distribution market in Japan. Thus, the problem
was irrelevant to the debates on strengthening relationships with Middle Eastern oil producing
countries. The Asian premium was not charged because of a lack of negotiating power on thepart of Japanese oil companies. Rather, the extra premium was created by the immaturity of theinternational oil markets. The issue of building a highly transparent free petroleum productmarket with low barriers to entry needs to be seriously addressed. There is no need for anational corporation like the Japan National Oil Corporation to enter the market and makedevelopment investments in the Middle East. Instead, what is necessary is to maintain andstimulate the international oil markets. It is not necessary to develop a major Japanese producer

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The Historical Flow of Black Gold: Two Approaches to Energy Security

upstream and it would be better if a transparent and free petroleum market were created. Japan
has a globally prominent petroleum products market of about 5 million barrels per day. Clearly,
Japan is an important customer not to be ignored by the Middle East countries dependent on oilrevenues. It is a sensitive and vulnerable and sensitive relationship. It is highly likely thatenergy companies with a downstream focus with excellent competitiveness in risk management
know-how will develop through the promotion of a free petroleum products market and atransparent gasoline and kerosene market. However, the government should secure strategicreserves in order to minimize disruption in supply, which is completely outside the function of
the market. This is because if there is true competition, the oil companies will be forced to
become more cost competitive, and will attempt to reduce their inventories.12
According to Amy Jaffe of the Baker Institute,13 Japan’s economy is sensitive to the
movements in the energy markets, but the government does not have the best countermeasures.
Due to the transformation of the oil markets since the late 1980s, long disruptions to supply
are unlikely, particularly unlikely for one specific OPEC consumer. Figure 8 shows the rankingof the oil crises that have occurred in the Middle East and North Africa between 1950 and
2000.14 Looking at the case of Iranian nationalization, which took over 44 months from March
1951 to October 1954, the drop in production was around 700,000 barrels per day, but
eventually became a cumulative loss of 940 million barrels. Looking at the 50 years since then,supply disruptions have only had a short term effect such as the six months for the first oil crisis(from October 1973 to March 1974), three months for the second oil crisis (from October toDecember 1980), and three months for the Persian Gulf War (August to October 1990). The
drop in daily production was around 3 to 4 million barrels per day, a mere 5 percent of the oilmarket. This further shows the transformations that have taken place in the oil market. Even if
there is a block in the global oil trade, market adjustment mechanisms work to keep the effectminimal. Similarly, in the unlikely event that there is a supply disruption in the oil market, that
effect would be felt equally by all affected countries. Rather than developing a domestic oil
supply through the Japan National Oil Corporation and making the Japanese public continue to
pay a standard premium to secure crude oil, it would be more effective to keep a stock pile ofcheap oil, and to release those reserves in times of need. This way, a premium would only haveto be paid during times of short term supply, which is likely to continue in the future.

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Yuji Nakamura

Figure 7

Asian premium for Middle East crude oil(Source) PIW October 22, 2001
Vs. Europe
Vs.USA

US$/b

3
2.5
2
1.5
1
0.5
0
1994

1995

1996

1997 1998 1999

2000

2001

Figure 8

2. Globalization and interdependence
The common ground in the arguments of Masa-atsu Koyama, associate director of theCambridge Energy Research Association (CERA) and Amy Jaffe is that the oil markets havebecome freer and global since the late 1980s, and the features of oil as a “strategic good” which
is non-militaristic in itself but can be used for national interests. It is important to note that oil
has become a commodity which can be purchased easily at any time through the international
market. Therefore, in our current world of interdependence, pessimistic policies (such as Project
Independent) which are aimed at alleviating weaknesses by reducing the dependency on the
Middle East by using multiple supply sources should not be stopped. Also, national security

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The Historical Flow of Black Gold: Two Approaches to Energy Security

could be further improved by actively opening channels with the Middle East, and by policies
which increase the interdependence relationship (Project Interdependent) such as improving thetransparency of the Japanese market.

3. Optimism over technical progress
R. Manning insists that “when considering energy security, technology has a tendency to begiven too little credit.” From its beginning in the 1970s, the Club of Rome predicted that theworld’s oil would be depleted by 1990 but in actual fact, there was still 2.3 trillion barrels that
could be mined. This is according to the conventional concept of reserves, but if the Canadianand Venezuelan tar sands are included, there would be an additional 6 to 7 trillion barrels.
Therefore, the problem is not a lack of oil reserves. Natural gas is abundant and there should beenough fossil fuel to last this century at least. In the past 25 years, many geologists andenvironmentalists have highlighted concerns such as depletion of oil, food shortages, and the
spread of famine. Although the mass media have reported these claims with zeal, they areclearly not very realistic.
New ground is being constantly broken in energy technology, such as the current
application of computerized systems which can discover oil reserves using three or four
dimensional earthquake evaluations. Also, it is now possible to drill into extremely deep pockets
off-shore to gain access to cheap oil, and drilling dry holes can be eliminated as much as
possible. North Sea oil rigs were supposed to peak several years ago but did not, in great part
thanks to new technology which extended the life of the rigs The benefits from improved
technology has not been limited to drilling, but also extends to transportation in hybrid vehicles,
which will have a large impact on the energy markets. Advances in technology is increasing
efficiency. For example, since 1973, the US economy has grown 126 percent, but the use ofenergy has only increased by a mere 30 percent.15
Jaffe argues that to counteract the effects of global warming, rather than drafting ineffectualinternational agreements it is better to rely on technical developments.

4. Seperation of energy and national security
Amy Jaffe states that “Energy security must be considered by distinguishing between the twoelements of military and economics. In order to protect the Japanese economy, market-focusedpolicies should be chosen, and with regard to the problem of military security (in a narrow
sense), the application of the Japan-US alliance should be considered.”16

5. Deregulation
In analyzing the electricity market, Tatsuo Hatta, professor at the University of Tokyo’s Spatial

IIPS 2002 ♦ 15

Yuji Nakamura

Information Science Research Center, argues that deregulation does not only mean greater
choice and increased efficiency, but is also necessary for a steady supply and is better for theenvironment. To criticisms that a free market would be indifferent to supply chains andenvironmental concerns, he argues that an energy security tax could be levied. A tax in theinterests of the public would allow the markets to decide instead of having to rely on
government enforced nuclear power.317

6. Other followers of the market approach include Michelle Foss, chairperson of theInternational Energy Society and professor at Houston University, and Tetsuya Iida, seniorresearcher at the Japan Research Institute.

Geopolitical approach
1. Realism and power politics
According to Jitsurô Terashima,18 director of the Strategic Research Center at Mitsui and Co.,
Ltd., marketing on a global scale has transformed oil into a “commodity” from a “strategic
product.” The irony is that the result of pursuing a source of cheaper oil has meant greater
dependency on Middle Eastern oil which has reached 85 percent, higher than during the oilcrises. The situation has worsened, and just when a gap in the supply and demand was expected
the Asian crisis erupted, merely postponing the problem for the future. On the other hand, theUS has been developing an energy policy with a strategy. The “American Energy
Self-sufficiency Plan” is associated with this, and is the hidden agenda of the administration.
The crude oil purchasing plan of the US is to maintain domestic production at around 40 percent,to keep sources in the Americas including Canada, Mexico, and middle and central America at
75 percent, and Middle Eastern oil to below 10 percent. The US is maintaining an energy
strategy which would minimize the effect of a halt in petroleum from the Middle East. Looking
at the data, figure 9 shows the US is basically self-sufficient for its primary energy except for oil.
Dependency on imported oil is at 52 percent, but as shown in figure 10, 50 percent of that is
imported from other American countries including Canada, Mexico, and Venezuela.
Furthermore, as is shown in figure 11, not only does most of the crude oil from the Middle East
come from Saudi Arabia, a US ally, but as can be seen in figure 12, the US has even secured atransportation route from the Red Sea through an east-west pipeline for shipping crude oil from
Saudi Arabia. Therefore, the US would not be affected even if the flow of crude oil through theStraits of Hormuz came to a complete stop. It is not an exaggeration that while promoting thegeneral theories of economic globalization and international markets, the US maintains a firm
hold on a structure of self-sufficiency.

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The Historical Flow of Black Gold: Two Approaches to Energy Security

Furthermore, surrounded as it is by Arab countries, Israel’s strategy has been to try andobtain 20–30 percent of its consumption from solar energy. In other words, energy is clearly an
issue closely linked to national strategy.

Figure 9

Figure 11

Figure 10

Figure 12

IIPS 2002 ♦ 17

Yuji Nakamura

China as a factor of instability
Kent Calder, director of Princeton University’s US-Japan Research Center, believes that overthe next generation East Asian governments will face increasing uncertainty because of China’s
increase in demand for energy.19 Specifically:
1) China’s dependency on oil from the Middle East is expected to increase in the future asshown in figure 13;2) China will barter weapons for oil and actively contribute nuclear weapons-related
technology in order to consolidate relationships;
3) China will strengthen her navies in order to defend the sea lanes which are the shipping
routes from the Middle East.
4) In order to relieve a severe shortage of energy in Southern China, the PRC will begin tostrongly insist on ownership rights of the South China Sea natural resources.
In order to avert destabilization in East Asia, Calder suggests that priority on security be
increased and that it be broadened to include energy issues. Also, the US, China, and Japan
should cooperate to help China develop energy resources. According to the RAND Institute, theChinese government is depending on past experience when it comes to the energy issue. During
the Chinese-Russian honeymoon of the 1950s, China was dependent on the Soviet Union forboth supply and technology of oil. In the 1960s however, the Chinese economy suffered asevere oil crisis after the Sino-Russo relationship turned sour. This has reinforced the notion in
China that oil is a strategic product. One indication of this is the low cost of oil exports to Japanin the 1970s in an attempt to prevent the possibility of a Siberian oil field development bringing
Japanese-Russian relations. In China, oil is still seen as a strategic resource,20 and they do not
accept that a free energy market is secure.21 The policy of the Chinese government is known as“2 import and 1 export,” where imports are made up of oil and foreign capital, and the one
export is investment in overseas development ventures. This is an attempt at dramaticallyreducing their dependency on the sea lanes controlled by the US. The Chinese government isextremely interested in the development of oil fields in Kazakhstan and the construction of apipeline. This is in order to significantly reduce their exposure to the Middle East oil shipping
route, which are essentially controlled by America. 22 Furthermore, China does not havecapability to refine Middle Eastern crude oil which is high in sulfur, but they have accepted
capital investments from Aramco of Saudi Arabia, Kuwait Petroleum Corporation of Kuwait,
and National Iranian Oil Company of Iran in order to increase that capability.23

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The Historical Flow of Black Gold: Two Approaches to Energy Security

Figure 13 - Chinese dependency on Middle East Oil

Positive side of nuclear power
Terashima states that Japan should accumulate technologies for a peaceful use of nuclear energy
in accordance with its non-nuclear stance and to survive in international society as a lightly
armed economic nation. He insists that by doing so, Japan can make major contributions to theinternational society, which is in its national interest. He suggests that Japan establish andactively propose to the world a Japanese made de facto standard for nuclear power safety.24
As a reference, the major researchers and research institutes have been classified according
to their views on energy security.

Figure 14—Two approaches to energy security25

M. Lynch

Iida
Based on interdependence
Hatta

Chatham House

Geopolitical approach

Amy Jaffe

Market analysis approach

Kent Calder
RAND
CSIS

Fesharakibased on power politics
Terashim

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Yuji Nakamura

Medium to long term prospects of the oil market
In 1972, the Club of Rome released its report on the limits to growth. Since then, the medium tolong term supply of oil has been subject to both optimism and pessimism.26 When considering
energy policy, the future of the energy market should be viewed bearing in mind the previously
stated world views. From a general viewpoint, the realistic approach tends towards pessimistic
forecasts for the future oil supply, while the market analysis approach shows a tendency towards
optimism. However, in discussing future oil supply and demand, the IEA forecast will be usedwithout comparing both approaches.

IEA Long term forecasts
Figure 15 and figure 16 show the forecast for supply and demand by geographic region. What isclearly noticeable is the increase in demand by Asia, especially China, and the dramatic increasein supply by the Middle East. The Middle East holds 65 percent of the world’s confirmed oil
reserves, and OPEC’s production share will increase from the 1997 40 percent (29.8 million
barrels per day) to 54 percent (61.8 million barrels per day) by 2020. China’s demand is
expected to double from the 5 percent (4.1 million barrels per day) in 1997 to 10 percent (11.0
million barrels per day) by 2020. Half of the oil used in developed countries is for transportation,
and as China moves into an age of motorization, oil will become a critical resource. Various
scenarios for future energy supply and demand can be drawn up which are more pessimistic or
optimistic than those of the IEA, but even from the optimistic viewpoints, the trends in China on
the demand side, and the strength of the Middle East on the supply side will undeniably increase
the sensitivity of energy.

IIPS 2002 ♦ 20

The Historical Flow of Black Gold: Two Approaches to Energy Security

Figure 15 - Forecast of World Oil Supply by Geographic Region

North America
EuropePacific
OECD Total
RussiaEastern Europe
Total
China
India
Other Asia
BrazilOther
SouthAmerica
AfricaMiddle East
Non-OPEC Total
Middle East OPEC
Other OPEC
OPEC Total
Other
World Total

1997
10.8
6.7
0.7
18.0
6.1
1.3
7.1
3.2
0.8
1.1
0.9
5.7
2.7
1.9

2010
9.9
5.2
0.6
15.7
7.1
3.2
10.3
3.0
0.5
1.6
2.1
6.8
1.8
1.8

42.0
19.3
10.3
29.8
2.7
74.5

46.9
30.5
13.6
44.1
4.8
95.8

(million barrels per day)2020
1997-2020
-0.1%
9.0
2.7
3.5
-1.3
0.5
1.4
13.1
7.9
1.4
4.4
5.3
12.3
2.2
-1.0
2.6
-2.6
0.1
0.1
1.4
5.0
3.2
0.7
6.8
2.3
1.8
0.8
1.6
46.1
46.7
15.1
61.8
6.8
114.7
(Source: IEA 2000)

0.4
4.9
1.7
3.2
7.6
1.9

Figure 16 - Forecast of world oil demand by geographic region

North America
EuropePacific
OECD Total
FSUand E.Europe
China
South Asia
East Asia
South America
AfricaMiddle East
Non-OECD Total
Other
World Total

1997
20.2
11.1
6.5
40.9
1.7
4.4
2.3
6.1
6.1
2.1
4.1
30.1
3.5
74.5

2010
24.0
16.0
7.0
46.9
5.8
7.6
4.1
10.1
8.7
3.0
6.7
45.0
3.9
95.8

(million barrels per day)2020
1997-2020
26.1
1.1%
16.8
0.7
7.1
0.4
50.0
0.9
7.4
2.0
11.0
4.4
6.2
4.5
13.6
3.3
10.9
2.5
3.9
2.7
7.0
2.4
60.0
3.1
4.7
1.1
114.7
1.9
(Source: IEA 2000)

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Yuji Nakamura

Major issues
Energy security in China and the Middle East is the subject of various discussions. These
include the impact of easing the demand on oil as the global economy slackens because of theslowdown in the US economy, revolutionary technology in renewable energy and fuel cells,
increased production in non-OPEC regions (North Sea, Central and South America, Africa,
Russia and the countries surrounding the Caspian Sea), and the US’ response to international
cooperation on global warming.
I traveled to the US in late August 2001 and to Southeast Asia in early October to meetenergy experts and discuss in more detail the various aspects of the two approaches. The
following is a summary of the issues raised at these meetings.

1. Structural problems
In the market approach, the oil market transformation post-1980s has been emphasized but
serious problems have yet to be resolved. Transaction volumes in WTI and Brent oil, which are
the markers in crude oil, are only around 1 million barrels per day, less than 2 percent of thetotal world volume traded. Using these local crude oils as Merkmal, or the indicator of global
crude oil transactions, is the cause of price volatility. As is shown in figure 17, in the five years
from 1996 through 2000, the actual price of crude oil varied widely across a range of $10 to $30
per barrel. The economic effect of a $10 price fluctuation per barrel cannot be ignored. In theUS, the effect of the drop in price from $30 per barrel at the beginning of 2001 to $18 per barrel
by the end of the year was similar to a tax reduction of approximately fifteen billion dollars.27
In Japan, a $10 price increase is estimated to be equivalent to an outflow of national wealth ofapproximately $5000 per day or $18 billion per year.28
The issue of incomplete information in the oil markets has also not been resolved. Inventory
statistics for oil are only monitored in OECD countries, and no one has a firm grasp of the
supply/demand fundamentals.
In contrast to above argument, those with faith in the markets and the reliability of the crude
oil markers, insist that WTI and Brent should remain the benchmark as they are crude oils of
average quality with a global distribution. Quality (heavy and/or sour) rather than market share
is a more representative indicator of the market.29

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The Historical Flow of Black Gold: Two Approaches to Energy Security

Figure 17—Volatility of the price of crude oil

2. Probability of a new oil crisis
The revival of the US economy was not firmly settled by the simultaneous terrorist attacks of
September 11, and this has resulted in a reduction in demand for oil. However, because offavorable economic conditions in the US and the quicker than expected recovery of the Asiancrisis, the world’s excess production capacity dropped to around 2 million barrels per day fromthe highs of around 10 million barrels per day in the 1980s. From experience, when excess
production capacity drops below 5 percent, the market is strained. This time however, despite
the fact that excess production capacity has dropped to around 3 percent, there is still no sign ofincreasing capacity. Some opine that this is actually the start of a new energy crisis. In otherwords, there is concern of “unintentional supply capacity shortfalls.” Investments in the oilfields around the Caspian Sea are not connected to increased production by non-OPEC regions.
Economic sanctions against Iran, Iraq, and Libya are still hindering development investment.
The major OPEC countries are reducing investments in energy in order to deal with domesticsocial issues caused by the explosion in population and youth unemployment. Investment of
capital by the major oil companies is pointed not towards oil development, but rather towards
mergers and acquisitions. The global warming issue and environmental protection pressures arealso restricting resource development.
In May 2001, US President George Bush announced the national energy policy, which was
an attempt to resolve these structural risks. At the present time, however, there is no guaranteethat when the economy recovers there will be sufficient supply. In the short term, there is
speculation that Saudi Arabia has secured an excess supply of approximately 2 million barrels

IIPS 2002 ♦ 23

Yuji Nakamura

per day. The long-term supply and demand mechanisms of the oil markets are in question.

3. US energy strategy30
In order to evaluate Terashima’s claim that the “North American Energy Network Initiative”
actually existed as a continuation of a “hidden agenda” from past administrations, I queried
most of the major US researchers on this point. They were unanimous in their response thatrather than a hidden agenda, a consistent unified energy strategy did not even exist in America.
Bush’s new energy policy was supposed to avert a potential crisis from a short fall in supply.
Undoubtedly, it will have to go through many changes in Congress because of opposition fromthe Democrats. Since a national energy policy is subject to the democratic process, policy
consistency is not something that can be expected. As the point of a hidden agenda is its
inadmissibility so an open declaration of its existence was hardly likely. Economic
rationalization dictates that the US will continue to try and procure crude oil at the cheapest rate.
Therefore, crude oil procurement from the Middle East will inevitably continue, which is why
the US continues to have a military presence costing approximately $4 million per annum in
Saudi Arabia.
The proposal to strengthen relationships with Canada and Mexico in the “North American
Energy Network Initiative” was noticeable in the new policy.31 I believe that the idea camefrom the “American Energy Self-sufficiency Initiative.”
The support given to the Bush administration’s proposal of the ANWR is from an
unexpected quarter. The American labor unions (who traditionally tend to back the moreenvironmentally friendly Democratic Party) together with the American Petroleum Instituteannounced their support for the Bush administration. This was because the relief in the supplyof energy and the reduction in crude oil prices from the development in Alaska will improve
America’s industrial competitiveness and will create 700,000 new jobs. Energy security ismoving with a momentum beyond party politics. On 18 April 2002, however, Congress rejected
this proposal.

4. China’s energy strategy
In contrast to the Chinese threat espoused by the disciples of the geopolitical approach, thefollowers of the market analysis approach suggest otherwise. Despite the Chinese government’s
pronouncements that oil is a strategic product, a careful observation of their actions would
suggest that, rather surprisingly, their decisions are based on non-strategic reasons.
As shown in figure 18, China imports much of its crude oil from Oman and Yemen. This isbecause as China’s refineries have limited capabilities of desulfurization, the “sour” crude oilfrom Iran, Iraq, Saudi Arabia, or Kuwait, which is high in sulfur, is incompatible with its

IIPS 2002 ♦ 24

The Historical Flow of Black Gold: Two Approaches to Energy Security

refinery capabilities.32 Although China is making direct investments into foreign oil fields,
most of the crude oil produced is not imported into its domestic market, but is sold to othercountries, and thus does not contribute to China’s own security33. Some contend that after China
becomes a full member of the World Trade Organization and a player in the global markets, theunproductive state oil companies, which are currently conveniently tucked away, are bound tocome to light.

Figure 18—China’s sources of crude oil

5. East Asia energy network
According to the interdependence theory, as countries become more dependent and a mutuallyvulnerable and sensitive relationship develops, war is less likely to break out althoughdisagreements will continue to exist. 34 In the development of energy, establishing long-termbusiness relationships on international projects will increase the potential for bilateral friction.
These projects will be building long-term infrastructure, that should have a service life of many
decades, such as international long distance pipeline and electrical networks. In a simple
scenario, a unilateral decision to halt supply will have a negative impact on the economy of theimporting country. If, however, the relationship is one based on a long-term business, thesupplying country will be dependent on sales revenue from the joint infrastructure project, andwill also be affected by a sudden halt. This is an example of a mutually vulnerable and sensitive
relationship.
During the early 1980s, dubbed the “new cold war,” the Reagan administration asked theEuropean Union (EU) to jettison plans for a pipeline importing natural gas from the USSR, but
the EU disagreed citing the theory of interdependence. If the Soviet Union was dependent on
the revenue from gas sales to Europe, a mutually vulnerable and sensitive relationship would
form, which would mean that disputes would be less likely to descend into war. The rest is

IIPS 2002 ♦ 25

Yuji Nakamura

history: Western Europe and the USSR continued to have disagreements but no military clashes.
Of course the problem is not that simple. At the time, the pipeline network within COMECON
nations was used by the Soviet Union to subordinate and turn its neighbors into satellite nations.
Thus, the result was not one of interdependence but one-sided. Although the satellite countries
became more dependent on the Soviet Union, this was not reciprocated. The transactions would
not have taken place in a free and transparent market, as the prices were so low they were
almost donations. During the cold war, Western Europe was not too dependent on the Soviet
Union and was therefore in a different position from Eastern Europe.35
In Asia and Japan, the construction of a natural gas pipeline network connecting thecountries of East Asia has long been advocated. Where large gas fields are connected by land, apipeline is feasible. For example, in Western Siberia and the North Sea, or Alaska and the Gulf
of Mexico. In East Asia however, the gas fields are small or medium sized and interspersed
throughout the regions. Furthermore, the cost of an offshore pipeline, which is more expensive
than an onshore pipeline, could be prohibitive. Also, certain historical issues in Northeast Asia,
if unresolved, would also be a barrier. For Japan in particular, the preparation of theinfrastructure for LNG is also given as a reason.
In October 2001, I had the opportunity to visit several state-owned energy companies on a
research trip to Southeast Asia. In Indonesia, the president and CEO of the state-owned (now inthe process of privatization) petroleum company Pertamina36, Baihaki Hakim, gave an outline of
their new business strategies and, with a map of Southeast Asia in his room, talked of building apipeline network.
In Thailand, I met Jaru-Udom, former president and CEO of a development company in the
Joint Development Area (JDA). The right to the Gulf of Siam has been the thorn in the side
between Thailand and Malaysia. The result of a search for common ground was cooperation indeveloping this area by the JDA. Based on the success of his experience, Jaru-Udom waslooking into the construction of an East Asia pipeline network. He said that Singapore as thecenter of the network was trying to become the hub of natural gas transportation37. As a city
state, Singapore relies on imports for all of its energy, but domestic demand for natural gas
remains at a minimum. Regardless of this, it is making use of its geography and has a granddesign to place energy with its other businesses including ocean container transportation, aircargo transportation, financial services, and information technology.

Conclusion
Oil will continue to be the primary source of energy for the next 20 years, at the very least. In
this article, I have looked at the impact oil has had on bilateral relations, and its future prospects.
The two approaches on energy security that have evolved, the geopolitical and the market

IIPS 2002 ♦ 26

The Historical Flow of Black Gold: Two Approaches to Energy Security

analysis approach, have been examined. A decade has been and gone since the end of the cold
war and the world has been forced into a new era by the simultaneous terrorist attacks of
September 11 in 2001. On the one hand, from a market analysis approach, the age ofglobalization and marketing has been positive as the market pursues increased profits for theinternational community as a whole. On the other hand, a cool geopolitical focus whichprioritizes national interests is also being pursued. These different perspectives should not be
considered mutually exclusive but as complementary in energy security.

Appendix 1—Disruptions to supply of oil since 1951
(Source: US Department of Energy)
Date of Net Duration (Months Average Gross Reason for Oil Supply Disruption
Oil Supply
of Net Supply Supply Shortfall
Disruption
Disruption)(Million B/D)
3/51-10/54

44

0.7

Iranian oil fields nationalized May 1,
following months of unrest and strikes in
Abadan area.

11/56-3/57

4

2.0

Suez War

12/66-3/67
6/67-8/67
5/70-1/71

3
2
9

0.7
2.0
1.3

Syrian Transit Fee DisputeSix Day War
Libyan price controversy; damage to
Tapline4/71-8/71
3/73-5/73

5
2

0.6
0.5

10/73-3/74

6

2.6

4/76-5/76

2

0.3

Algerian-French nationalization struggle
Unrest in Lebanon; damage to transit
facilities
October Arab-Israeli War; Arab oil
embargoCivil war in Lebanon; disruption to Iraqi
exports

5/77
11/78-4/79
10/80-12/80
8/90-10/90
4/99-3/00

1
6
3
3
12

0.7
3.5
3.3
4.6
3.3

Damage to Saudi oil field
Iranian revolution
Outbreak of Iran-Iraq War
Iraqi invasion of Kuwait/Desert Storm
OPEC (ex. Iraq) cuts production in effort
to increase prices.

IIPS 2002 ♦ 27

Yuji Nakamura

Notes
1

The basic goal of the Japanese Energy Policy is to “achieve a secure supply of energy while

responding to the demands for environmental protection and increased efficiency,” and specific strategies
to achieve this basic goal had been discussed at the Advisory Committee for Energy under the auspices ofthe Minister of Economy, Trade and Industry since April 2000, and detailed proposals were publicly
announced in May 2001. In the United States, a new energy policy was announced in May of last year
under the leadership of Vice-President Dick Cheney, and it has been debated in the legislature and has
now moved to budgeting and legislation.
2

I traveled to various countries in Southeast Asia toward the end of October 2001 as part of myresearch on several energy policies. It was noteworthy that while Malaysia has a public oil and gas
corporation which was vigorously participating in the market encouraged and led by the government,
Thailand, in contrast, was actively deregulating in order to let the market mechanisms kick in.
3

Research on natural gas is increasing and the results would suggest that a technical revolution isnecessary to enable natural gas to be used as fuel. Also, the infrastructure to enable this use practical are
the keys to making natural gas a primary energy source comparable to petroleum. See Kazuhiko Fuji
Sekiyû Shinwa [Myths about Oil](Tokyo: Bungeishunju, 2001).
4

Yoshinobu Yamamoto, Kokusaiteki Sohgoizon [International Interdependence] (Tokyo: Universityof Tokyo Press, 1989), p. 11.
5

Robert O. Keohane and Joseph S. Nye Jr.,

6.

Yamamoto [1989] p. 29.

7

According to Huntington [2000] p. 168, the real meaning behind the Persian Gulf War was that it

was the first clash between civilizations over oil resources since the end of the Cold War. The war wasover which civilization (the Islam world or Anglo-America) had control over the world’s greatest resource
deposits.
8

In 2001, oil production started to turn around and the continuous drop in production which had

continued since the breakup of the Soviet Union came to an end.
9

According to a forecast by R. Ebel, Energy Research Director of the Center for Strategic andInternational Studies (CSIS) made during discussions with the author in Washington D.C., production
from the Caspian Sea should be around 2.5 million barrels per day by 2010, accounting for a 3 percent
share of the world’s production.
10

Yuji Nakamura, “National Strategy behind the Energy Policy of the Bush administration.”

11

Comments made by Mr. Ishii of the Japan National Oil Corporation hint at this distinction. This

had also been made several years earlier by Bill Martin, the former assistant director of the Energy
Department, according to M Lynch of the Massachusetts Institute of Technology.

IIPS 2002 ♦ 28

The Historical Flow of Black Gold: Two Approaches to Energy Security

12

This is a point made by Koyama, who has a career in the oil industry and currently works at the

Cambridge Energy Research Association (CERA) where Daniel Yergin is the current director.
13

Amy Myers Jaffe, “Japanese Energy Security and Changing Energy Markets: An Analysis ofNortheast Asian Energy Cooperation and Japan’s Evolving Leadership Role in Asia,” The Center forInternational Political Economy and The James A. Baker III Institute for Public Policy, Rice University,(May 2000).
14

For detailed data, see Appendix 1.

15

From comments made at the “Thinking About Energy Security” 30 November 2001 Symposium

sponsored by Asahi Shimbun and others.
16

Jaffe, Japanese Energy Security.

17

Tatsuo Hatta, “Efficiency of Supply, Stable Supply and Environment Conservation” 2000.

18

Jitsurû Terashima, “International and Geopolitical Trends Concerning Energy Security,” 2000.

19

Kent E. Calder, Pacific Defense: Arms, Energy, and America’s Future in Asia..

20

RAND, Project Air Force, Erica Strecker Downs “China’s Quest for Energy Security,”2000. p. 43;

Choon-ho Park and Jerome Alan Cohen “The Politics of the Oil weapon” Foreign Policy no. 20, fall 1975,
pp. 28–40, Ronald C. Keith [1986] pp17–78.
21

RAND, Project Air Force, p. 23.

22

Ibid., p53.

23

Ibid., p48.

24

Terashima, International and Geopolitical Trends.

25

On a geopolitical approach, the Royal Institute of International Affairs (RIIA,) takes the viewof relative interdependence. Within the market analysis approach, Fesharaki of the East-West Center in
Hawaii takes a position of realism. See Fereidun Fesharaki, Asia and Pacific Energy Risks, (Tokyo: Japan
Broadcast Publishing, 1995).
The position of both sides was not addressed in detail in this report, but is a subject for future
investigation.
26

The optimistic view (M. Lynch of MIT ) and the pessimistic view (former Amoco engineer,

Campbell) continue to be the subject of debate. Recently, the optimistic view appears to have gained theupper hand. For details of the debate, refer to Fuji [2001].
27

Comments taken from R. Manning at the “Thinking about Energy Security” 30 November 2001

Symposium sponsored by Asahi Shimbun Publishing Co. and others.
28

Terashima, International and Geopolitical Trends.

29

Comments by Professor M. Foss.

30

For details, see Yuji Nakamura, “National strategy behind the energy policy of the Bushadministration.”

IIPS 2002 ♦ 29

Yuji Nakamura

31

National Energy Policy Development Group (2001), Chapter 8-8.

32This was a point made by both Koyama and the RAND Institute, pp.31–32.

33

This was pointed out by R. Ebel, Energy Research Director of the Center for Strategic andInternational Studies (CSIS) in Washington D.C. It was also pointed out by the RAND Institute [2000]
p. 54
34

Yamamoto [1989] p. 23.

35

There have been suggestions that a guideline was set to keep Western European dependency onnatural gas from the Soviet Union below 30 percent.
36

The move towards privatization is proceeding, and the privatization proposal passed through theDiet at the end of October of last year.
37

Frances Lai [2001] “Maritime Security in South east Asia: Issue and Perspectives” IIPS, p. 10.

Reference
Robert A. Manning, “The Shocks of a World of Cheap Oil,” Foreign Affairs (January/February 2000)------- [2000.5] “Global Energy Situation and Energy Security Policy”
BP Amoco [2001] Statistical Review of World Energy 2001
CSIS (Center for Strategic & International Studies), Strategic Energy Initiative [2000]
The Geopolitics of Energy into the 21st Century
Daniel Yergin [1991] The Prize: Quest for Oil, Money, and Power 1991.
EIA(Energy Information Administration of the US Department of Energy) [2001] International Energy
Outlook 2001 http://.www.eiadoe.gov/
IEA(International Energy Agency) [2000.9] China’s Worldwide Quest for Energy Security-------- [2000] World Energy Outlook 2000
James A. Baker Ⅲ Institute [2001.4]“Strategic Energy Policy: Challenges for the 21ST Century,” the James A. Baker Ⅲ Institute for Public
Policy and the Council on Foreign Relations
John Mitchell [1996] ｢The Geopolitics of the Energy｣ IEEJ Feb.1996------- [1998] “Fueling Asia’s Recovery” Foreign Affairs Mar/Apr 1998------- [1996.3] “Asia’s Empty Tank” Foreign Affairs Mar/Apr------- [2001] “The New Face of Northeast Asia” Foreign Affairs Jan/Feb 2001
Michael C. Lynch, [1997] Energy Security in Asia, IEEJ April Edition.
------- [1998] “Crying wolf: Warning about oil supply” M.I.T. March

IIPS 2002 ♦ 30

The Historical Flow of Black Gold: Two Approaches to Energy Security------- [2000] “Oil Market Structure and Oil Market Behavior”WEFA, Inc.
National Energy Policy Development Group [2001] National Energy Policy
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IIPS 2002 ♦ 31

About the author

Yuji Nakamura was seconded to IIPS from
Nippon Steel Corporation (NSO) as a
Senior Research Fellow in January 2001.
He majored in political economy at Waseda
University and joined NSO in 1981. In
1983, he was seconded to the Institute forInternational Study and Training (IIST).
From 1984 to 1988, he worked in the Expo
department at NSO. Before joining IIPS, he
was responsible for line pipe exports fornatural gas trunk lines, mainly in Russia,
the Middle East, the North Sea and Asia.
Whilst at IIPS, his research will focus onenergy and environmental issues.