ENERGY SECURITY: What Does It Really Mean?

April 7, 2011 § 2 Comments


This is loosely based on February’s Breakfast Forum topic

The International Energy Association (IEA, not to be confused with the domestic version EIA) defines energy security as “uninterrupted physical availability of energy at affordable prices, while respecting environmental concerns.”  To most, this is not the only aspect.  A straw poll of the general populace would likely find that it is more concerned with energy independence.  In this context, energy equates almost singularly to oil, since it is reliant on imports while other forms of energy are largely generated domestically.

Reduced reliance on imported oil resonates on many levels.  Increased domestic production helps, but not as much as substitution of conventional transport fuels.  Both measures serve to create jobs and help the balance of payments.  We consume roughly 18 million barrels of oil daily, as compared to about 21 million a scant two years ago.  Of this, about 60% is imported.  At $100 per barrel, that represents about $400 billion payments out of this country, creating jobs elsewhere.  Compared to Europe, our taxes on gasoline are relatively low, so conservation is not hugely advantageous.  This is why electric cars will have better breakevens in Europe than the U.S.  But legislation to improve gas mileage does improve efficiency, even though feature creep has cut into that gain.  Cars today have more power hungry devices than they did 25 years ago, and much larger as well.  The Toyota Corolla of yesteryear is a mere shadow of its current self.

Climate change arguments are steadily losing traction in Washington, D.C. Energy security on the other hand is in play.  There is also something about the word “security” that gives comfort.  Witness the clever coining of the Homeland Security name, invoking visions of a warm fireplace and apple pie aromas.  Then the naming folks lost their way with the Bureau of Ocean Energy Management and Regulation replacing the simple Minerals and Management Service.  MMS was replaced by BOEMR, which unfortunately comes out sounding like ”bummer” – but enough with the digression. Energy security objectives could result in low carbon solutions.  Certainly, natural gas replacing diesel will reduce net emissions, as well as biofuels. Electric cars achieve this objective by shifting the emissions away from the tailpipe to a more tractable location, the power plant.  They also are about 50% more efficient than conventional engines on a “well to wheel” basis.  So you simply consume less energy per mile no matter what the emissions.

Economic security was the basis for the IEA definition.  Since energy is central to our economic being, secure affordable access is a must.  James Hamilton at UC San Diego has a somewhat controversial position that essentially states that the last recession was largely driven by oil price shocks. In his previous work, Hamilton has demonstrated at least a temporal correlation between recessions and oil shocks.  The importance of this observation is that we have previously subscribed to the position that an upcoming plateau in oil production will lead to a serious supply imbalance unless we move immediately to oil substitution.  Consequently, oil substitution may no longer be a choice, purely from an economic security standpoint.  The climate change positives will simply be lagniappe (meaning “gravy” in Cajun vocabulary).

Military security is a factor as well, although seemingly in an indirect fashion.  Military measures to keep the oil shipping lanes open have other defense and foreign policy purposes too.  Many still believe that the Iraq war was about access to oil.  If so, the return on investment will certainly not be high.  Even the business developed due to oil revival in Iraq has not benefitted domestic firms any more than it has European or Russian for that matter.  But there is strong precedence for wars being fought, and questionable governments being supported in the pursuit of energy access.  Finally, any military effort relies on secure access to transportation fuels.  The Germans realized this in the build up to WWII.  They refined the Fischer-Tropsch technology invented in the late twenties.  The entire war effort was fueled by transport fuel from coal.


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