That precept has proved itself again and again.3
THE RETURN OF ENERGY SECURITY
Since the start of the twenty-first century, a periodically tight oil market and volatile prices have fueled new concern about energy security. Other factors also add to the concern: the instability in some oil-exporting nations, jihadist terrorism, the rebirth of resource nationalism, fears of a scramble for supplies, the costs of imported energy, and geopolitical rivalries. The turmoil that swept over much of North Africa and the Middle East in 2011 disrupted supplies and added a fear premium to the oil price. Underlying everything else is the fundamental need of countries—and the world—for reliable energy with which to power economic growth.
Energy security concerns are not limited to oil. Natural gas was formerly a national or regional fuel. But the development of long-distance pipelines and the growth of liquefied natural gas (LNG) have turned natural gas into much more of a global business. Electric power blackouts in North America—such as the one that shut down the northeast of the United States in 2003—and in Europe and Russia, generate worries about the reliability of electricity supply systems.
Hurricanes Katrina and Rita, which struck the Gulf of Mexico’s energy complex in a one-two punch in 2005, created something that the world had not seen, at least in modern times: an integrated energy shock. Everything seemed connected, and everything was down at the same time: oil and natural gas production and undersea pipelines in the Gulf of Mexico, and—onshore—receiving terminals, refineries, natural gas processing plants, long-distance pipelines, and electricity. The storms showed how fundamental was the integrity of the electricity system on which the operation of everything else depended, be it the refineries and communications systems, or the pipelines that take supplies to the rest of the country—or the gas stations, which lacked the electric power to operate their pumps. The huge earthquake and tsunami that struck Japan in 2011 killed more than 15,000 people, devastated a major part of the country, and set off a nuclear accident. It also took down the region’s power system, knocking out services, immobilizing communication and transportation, disrupting the economy and global supply chains, and paralyzing efforts to respond to the tragedy.
In China, India, and other developing countries, chronic shortages of electric power demonstrate the costs of unreliability. The Internet and reliance on complex information-technology systems have created a whole new set of vulnerabilities for energy and electric power infrastructure around the world by creating entry paths for those who wish to disrupt those systems.
THE DIMENSIONS
The usual definition of energy security is pretty straightforward: the availability of sufficient supplies at affordable prices. Yet there are several dimensions. First is physical security—protecting the assets, infrastructure, supply chains, and trade routes, and making provision for quick replacements and substitution, when need be. Second, access to energy is critical. This means the ability to develop and acquire energy supplies—physically, contractually, and commercially. Third, energy security is also a system—composed of the national policies and international institutions that are designed to respond in a coordinated way to disruptions, dislocations, and emergencies, as well as helping to maintain the steady flow of supplies. And, finally and crucially, if longer-term in nature, is investment. Energy security requires policies and a business climate that promote investment and development to ensure that adequate supplies and infrastructure will be available, in a timely way, in the future.
Oil-importing countries think in terms of security of supply. Energy-exporting countries turn the question around. They talk of “security of demand” for their oil and gas exports, on which they depend to generate economic growth and a very large share of government revenues—and to maintain social stability. They want to know that the markets will be there, so that they can plan their budgets and justify future levels of investment.
THE LIMITS OF “ENERGY INDEPENDENCE”
In the United States, the issue of energy security often gets framed in terms of energy independence. That phrase has been a political mantra since first articulated by President Richard Nixon in his November 1973 “Project Independence” energy policy speech. Just three weeks earlier, an unthinkable—and yet also foreseeable—event had occurred. The Arab oil exporters, wielding the “oil weapon,” had embargoed oil supplies to Western countries in response to the United States’ hurried resupply of weapons to a beleaguered Israel, reeling from a surprise attack on Yom Kippur in October 1973. Oil prices were on a trajectory to quadruple. In his speech, Nixon deliberately modeled his Project Independence plan on the goal that his old rival John F.