NS4053 Fall Term 2013 Daniel Yergin – Energy Security

Daniel Yergin: Ensuring Energy Security I Energy security a major issue since Churchill’s time – shifting British Navy from coal to oil Churchill’s advice: “Safety and security in oil lie in variety and variety alone” Energy security focus often driven by tight oil markets and high oil prices, but new concerns in recent years: Power blackouts more common Increased risk of terrorist attacks to energy infrastructures Instability in many producing countries Increased threat posed by Iran Natural disasters seem to be more frequent 2

Daniel Yergin: Ensuring Energy Security II “Energy Security” means different things for different countries: Developed world – availability of sufficient supplies at affordable prices Energy exporting countries – security of demand for exports For Russia, aim is to reassert state control over strategic resources and gain primacy over main pipelines to international markets For China and India – their ability to rapidly adjust to their new dependence on global markets after long standing commitments to self sufficiency For Japan – how to manage dependence on imported natural gas -- For many countries – whether to build new nuclear plants and perhaps return to clean coal For Canada -- access to U.S. and Chinese markets 3

Daniel Yergin: Ensuring Energy Security III Main principles for energy security Original energy security system created in response to 1973 Arab oil embargo International Energy Agency (IEA) created Intended to ensure coordination among industrialized countries in the event of supply disruption Encourage collaboration on energy policies Avoid hostile scrambles for supplies and Deter any future use of an oil weapon by exporters Early actions to increase energy security Strategic petroleum reserve Encourage increased exploration, technology, alternative energy 4

Daniel Yergin: Energy Security IV To maintain energy security – key principles Churchill’s diversification of supply still important Oil is abundant and peak-oil not yet a problem Resilience – develop a security margin in the energy supply system – buffer against shocks Recognize reality of integration – there is only one oil market -- a complex and worldwide system For all consumers, security resides in the stability of this market Importance of information High quality information underspends well-functioning markets IEA has led way in improving flow of information about world markets and energy prospects 5