Energy Security: A Geopolitical Perspective
Authors: Economides Michael J. 
Published: October 2008

There is a substantial imbalance in the location of energy producers and consumers, an imbalance that has precipitated world conflicts and one that will likely cause future upheavals. Prominent among these areas is the Middle East where five of the six countries with 75 billion barrels of reserves are located. The Straits of Hormuz through which one third of all oil world trade passes is a geopolitical choke point. Other areas such as Venezuela, Nigeria and Indonesia have also caused or are causing difficulties. Russia's recent ascendancy in the energy world has been an important counterbalance to the power of OPEC. However, recent events surrounding Russia's energy industry and newly emerged militant populism elsewhere have given rise to what can easily be described as energy imperialism.

Several professionals have concluded that energy limits should be a "genuine concern" not only for the developed world, but more important, "if the rich/poor gap is finally narrowed." Consider that about 2 billion people (one third of the global population) have no access to energy sources of any kind outside of charcoal, wood and animal dung. One obvious bright spot for the future is that energy consumption in the generation of wealth and the form of primary energy sources have not been constant throughout the last two centuries. Instead, the process has been dynamic; technology has played a considerable role and nations have and will "leap frog" in status by adopting technologies and efficiencies developed elsewhere, without having to repeat painful processes in pioneering nations such as the United Kingdom and the United States. Globalization of the economy will certainly aid the process further.

Of considerable significance to energy security discussions are the potential impacts arising from the current climate change debate. The progression of fuels from wood to coal to oil and now to natural gas has in effect reduced the amount of carbon emitted to the atmosphere per BTU consumed, but of course the total energy consumption has increased at a much more rapid rate. This paper briefly exmines the interrelationships between supply, demand and politics, and perhaps even the weather.

Introduction

In 1859, right after the now-famous Colonel Drake well was drilled in Titusville, Pennsylvania, shortages of the illuminant camphene caused by the Civil War made the price of oil shoot up to nearly $10 per barrel (more than $100 in current dollars). By the autumn of 1861, following a reckless race for production and the 3,000- barrel-per-day Empire Well, the price had plunged to under $5 a barrel, $30 in today's money. Four years later, newspapers in the Eastern U.S. were printing stories about running out of oil. History repeated itself 100 years later with the Arab Oil embargo triggered in part by the Yon Kipper war. (See Figure 1.)

Figure 1. Historical Price of Oil (BP Statistical Review) (available in full paper)

Predictions of the future supply of petroleum have typically been far less veracious than predictions of demand. Flawed predictions have caused public bewilderment, distrust and, more importantly, government inaction or poorly conceived reactions.