Energy Insecurity

Since 2001 prices for oil and most energy commodities have risen sharply and become more volatile. Prices have yo-yoed over the last 18 months - - first reaching all-time highs, then dropping by two-thirds, and after that rising back up to surprisingly high levels given the continuing weakness of the global economy.

In the January/February 2010 issue of Foreign Affairs, authors David Victor and Linda Yueh (“The New Energy Order: Managing Insecurities in the Twenty-first Century”) discuss our looming energy insecurities that will strike as two radically new challenges to our current global energy systems. According to the authors, the challenges are:

The first is a shift in the sources of consumption. The era of growing demand for oil and other fossil fuels in the industrialized countries is over; most of the future growth in demand will come from emerging-market countries, notably China and India. The International Energy Agency (IEA) has projected that by 2030, China will depend on imports for at least two-thirds of its oil, and India, for even more. These countries, especially China, are choosing to secure their energy supplies less by replying on commercial interests – the standard approach for all the biggest industrial energy uses over the last two decades – than by locking up supplies in direct bilateral deals with producing countries. For instance, China’s push into Africa, Central Asia, and other energy-rich regions, which usually involves special government-to-government deals, is a rejection of the reigning market-based approach to energy security. And because oil, gas, and coal are global commodities, these exclusive, opaque deals make it harder for markets to function smoothly, thus endangering the energy security of all nations. They also complicate efforts to hold energy suppliers accountable for protecting human rights, ensuring the rule of law, and promoting democracy.

The other big shift in the world energy system is growing concern about the environmental impact of energy use, especially emissions of carbon dioxide, an intrinsic byproduct of burning fossil fuels with conventional technology and the leading cause of global warming. Worries about climate change are one reason why the major stimulus packages passes since the global financial crisis began in 2007 have included hefty green-energy measures: by some accounts, these have made up 15 percent of global fiscal stimulus spending. Some believe that green-tinted stimulus measures will spur a revolution pushing for cleaner and more secure energy. Perhaps. But there is no doubt that energy systems are in for a major change. Curbing global warming will likely require cutting emissions of carbon dioxide and other greenhouse gases by more than half over the next few decades, and that goal cannot be achieved by just tinkering at the margins.

A third complicating issue is at the interface point between increasing consumption and greening. The security of oil and gas supplies is in question not only because the existing supplies are depleting quickly but also because investors are wary of pouring money into finding new resources. The problem is not underground in the rocks: technological innovation is more than amply offsetting the depletion of conventional fossil fuels. The problem lies in the massive economic and political risks inherent in new projects particularly those that supply energy across national borders and thus face a multitude of political uncertainties. Suppliers worry that there will not be enough demand to justify the investments, especially now that growing concerns about climate change have cast doubt on the future of fossil fuels without offering a clear alternative.

Energy security and military prowess have been closely linked throughout history. Modern warfare would be impossible without vast quantities of fossil fuel. In fact, the U.S. military is the single largest consumer of energy in the world. The DOD per capita energy consumption is 10 times more than the per capita energy consumption of China, or 30 times more than all of Africa. Our energy liabilities show up on the ledger in our currently military engagements. The British army calculates that it takes seven gallons of fuel to deliver one gallon of fuel in Afghanistan - - the U.S. is probably similar. The U.S. forces meanwhile consume one million gallons of fuel a day in Afghanistan and a similar quantity in Iraq. A Humvee with added armor does just four miles per gallon.

In Iraq and Afghanistan, about 40% of fuel is used to run electricity generators (The “fully burdened” cost of helicopter delivered fuel at remote outposts in Afghanistan runs as much as $400 per gallon). The military is investigating and experimenting with new ideas ranging from tents coated with commercial insulting foam to linking generators into a “smart grid” for greater efficiencies. Another idea is a mobile, hybrid power station that combines solar panels and wind turbines with a conventional generator.

For the foreseeable future, green technology and alternative energy source technology will mainly flow from the commercial sector to the military sector. Coordination and technology transfer is extremely important - - because the market is truly global with ideas and innovation quickly spreading to the rest of the world through the marketplace. For example, U.S. spending on renewable sources of energy can invigorate U.S., Chinese, and European firms that supply solar cells and wind turbines. Over time, look to the military as an important incubator for new green and alternative energy ideas, solutions, and innovations.