Even if the 28 IEA member countries were to succeed in lowering their oil imports in the coming years, increasing import dependency in other major consuming regions – notably China and India – would still mean that an oil supply disruption anywhere in the world could result in severe knock-on effects for all countries. But we must also now consider energy security in terms of gas, not just oil. The Russia-Ukraine gas crisis of earlier this year has made that very clear. Yet energy security goes beyond overcoming physical supply disruptions.

Additionally, we need to maintain our focus on investment for a lower carbon future, by being more efficient with the energy that we use, by embracing hydrogen technologies, renewables, carbon capture and storage, nuclear power and other technologies. Often, not enough emphasis is placed on the benefits of energy efficiency. The IEA has undertaken analysis that shows that IEA member countries are using 59% less energy today than they would have been had it not been for energy efficiency measures. This is a remarkable reduction – and one we must replicate beyond the IEA.

Unfortunately, recent global events may be overshadowing concerns about energy security. The current economic downturn may be providing some relief from the extraordinarily high oil prices that we saw in 2008. But while we may be seeing weaker demand and lower prices now, the medium to longer-term picture clearly indicates significant energy demand growth. Moreover, many oil fields are mature, which means that significant investment is needed to enhance the recovery of oil and to tap oil in new, or as yet undiscovered, fields. The current crisis threatens to derail these important oil investments needed for the future. This in turn could see us facing a supply crunch in the mid-term when the global economy picks up, thereby threatening energy security.

To enhance energy security, the IEA is urging all countries to invest in both oil supply side investments and alternative energies. For many months now, the IEA has been calling for a ‘clean energy new deal’. Economic stimulus packages provide an excellent opportunity to ensure more sustainable growth in the energy sector – both through upfront measures with impacts in the near term, and longer-term investment decisions. Already, IEA member countries have earmarked USD 128 billion toward energy efficiency measures. This is strong indication that governments understand that energy security will not occur on its own, governments have a key role to play.

Some 15 years ago, U.S. soybean farmers had the foresight to invest in the preliminary research of soybean-oil-based biodiesel. U.S. soybean farmers have been growing the U.S. biodiesel industry right along with their crop ever since. With funding for research and promotion, testing and technology, U.S. soybean farmers have helped increase biodiesel production from 500,000 gallons in 1999 to nearly 700 million gallons last year and earn soy biodiesel a place in the renewable energy debate.

Soybean farmers continue to respond to demand for soy, a versatile crop that can meet the world’s needs for food, feed and fuel. Biodiesel uses only about 3 percent of the U.S. soybean harvest and only the oil portion from a soybean. The majority of the soybean, about 80 percent, is processed into soybean meal, which consists mainly of protein for use in animal feed and human food.

According to the 2009 Prospective Plantings report from the U.S. Department of Agriculture, soybean farmers intend to plant 76 million acres this spring, which would be a record. This is among the reasons experts are citing as they predict a calming of the wild food price fluctuations that struck the world last summer. According to the 2009 U.S. Baseline Briefing Book from the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, food price inflation, which hit a record 5.5 percent in 2008, will return to more historic levels in 2009, falling to about 2.7 percent this year. The FAPRI report goes on to estimate that only 20 percent of the cost of food is due to farm production. Other costs throughout the food marketing chain are responsible for the remaining 80 percent.

The performance benefits of biodiesel demonstrate that this renewable fuel can most assuredly be a part of the world’s energy mix in the future. Soy biodiesel is one of the most tested renewable fuels on the market. In millions of on- and off-road and marine miles, biodiesel shows fuel consumption, horsepower, torque and haulage rates similar to conventional diesel fuel. Furthermore, soybean oil has proved to be the preferred biodiesel feedstock due to the improved lubricity, cold-flow properties and other diesel engine benefits of soy biodiesel compared with other biodiesel feedstocks.

In addition, soybean farmers spent millions in testing soy biodiesel in the new lower-emission diesel engines now required by the U.S. Environmental Protection Agency. The results of the testing show that biodiesel blends perform at least as well as petroleum diesel in reducing particulate matter and NOx emissions. And a new testing method that is capable of demonstrating lifecycle reductions in CO2 is now available. With this method, vehicle fleet managers will be able to demonstrate their CO2 reductions, which could eventually lead to carbon credit trading.

Support is lining up behind biodiesel. For example, two Missouri scientists have launched a petition titled “Scientists for Biodiesel,” which, among other things, declares biodiesel’s ability to reduce dependence on petroleum, address climate change and boost domestic economies. More than 70 scientists have already signed up in agreement.

1. Energy-saving policies must be implemented and enforced. We need all of the time we can provide to develop all possible sources of energy to feed an energy-hungry world. That means that we must have our current petroleum fuels last as long as possible.

2. Significant Investments in alternate energy sources must be made with all due haste. We are going to need developments in wind, solar, nuclear, and hydro to even begin to phase out our dependence on petroleum.

3. Fossil fuels, especially coal, need to be preserved as chemical feedstocks. Pathways from coal to synthesis gas and then to chemicals are well-known, but need to be improved and refined.

This picture is painted with the broadest of brush strokes with each point worthy of a lengthy, complex analysis but it gives the flavor of the roadmap ahead of us. However, a cautionary note: All of the above were happening in the late 1970’s in response to an OPEC oil embargo limiting the amount of petroleum reaching world markets. The cries for independence from petroleum were as loud as any we are hearing now. Yet, as soon as the embargo was lifted, all of the research activities directed toward alternate fuels and chemical sources pretty much stopped completely. We cannot afford to let that happen this time.

A NATO contribution could involve additional information sharing, training programmes and of course, partner out-reach, not least because the Alliance’s membership is broader than that of the EU including as it does the USA, Canada, Norway and Turkey, and it has partnership relations with key energy producer and transit states.

More practically, the alliance can contribute military capacity to the problem of energy security. This is particularly relevant given concerns about terrorist attacks on strategic choke points and other major installations and the problem posed by piracy to shipping: NATO can offer coordinated naval assets and maritime surveillance facilities that contribute to the activities of other organisations.

As the discussion tends towards diversification of transit route and, indeed, energy type, a potential role for NATO becomes more conceivable: a wider range of transit routes may well include routes through less stable areas. Moreover, increasing LNG in the energy mix means an increase in shipping.

Therefore, NATO, while it is not a lead organisation in working towards energy security, has an important contribution to make. A mechanism through which the Alliance’s assets can be usefully coordinated with those of other organisations such as the EU would be an important step.

1) Though much airplay is given to renewables, in fact the energy security debate is about fossil fuels.

2) Energy security has two mirror images: security of supply for fossil fuel importing countries, and security of demand for fossil fuel exporting countries.

3) What is lacking for an ordered energy transition to a low-carbon future is a political cooperation between importers and exporters that regulates fossil fuel production and price levels of fossils between certain margins – towards and after the peak, and for the benefit of importers as well as exporters.

It is energy insecurity that we should seek.

The uncertainty incumbent in phenomena such “peak oil”, or in the preponderance of hydrocarbon fuels in failed states fosters innovation. The more insecure we get, the more we invest in the recycling of energy-rich products; the more substitutes we find for energy-intensive foods; the more we conserve energy; the more we switch to alternatives energy; the more we encourage international collaboration; and the more we optimize energy outputs per unit of fuel input.

A world in which energy (of whatever source) will be abundant and predictably available would suffer from entropy, both physical and mental. The vast majority of human efforts revolve around the need to deploy our meager resources wisely. Energy also serves as a geopolitical “organizing principle” and disciplinary rod. Countries which waste energy (and the money it takes to buy it), pollute, and conflict with energy suppliers end up facing diverse crises, both domestic and foreign. Profligacy is punished precisely because energy in insecure. Energy scarcity and precariousness thus serves a global regulatory mechanism.

But the obsession with “energy security” is only one example of the almost religious belief in “scarcity”.
It is only a mild overstatement to say that the science of economics, such as it is, revolves around the Malthusian concept of scarcity. Our infinite wants, the finiteness of our resources and the bad job we too often make of allocating them efficiently and optimally – lead to mismatches between supply and demand. We are forever forced to choose between opportunities, between alternative uses of resources, painfully mindful of their costs.

This is how the perennial textbook “Economics” (seventeenth edition), authored by Nobel prizewinner Paul Samuelson and William Nordhaus, defines the dismal science:

“Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.”

The classical concept of scarcity – unlimited wants vs. limited resources – is lacking. Anticipating much-feared scarcity encourages hoarding which engenders the very evil it was meant to fend off. Ideas and knowledge – inputs as important as land and water – are not subject to scarcity, as work done by Nobel laureate Robert Solow and, more importantly, by Paul Romer, an economist from the University of California at Berkeley, clearly demonstrates. Additionally, it is useful to distinguish natural from synthetic resources.

The scarcity of most natural resources (a type of “external scarcity”) is only theoretical at present. Granted, many resources are unevenly distributed and badly managed. But this is man-made (“internal”) scarcity and can be undone by Man. It is truer to assume, for practical purposes, that most natural resources – when not egregiously abused and when freely priced – are infinite rather than scarce. The anthropologist Marshall Sahlins discovered that primitive peoples he has studied had no concept of “scarcity” – only of “satiety”. He called them the first “affluent societies”.

This is because, fortunately, the number of people on Earth is finite – and manageable – while most resources can either be replenished or substituted. Alarmist claims to the contrary by environmentalists have been convincingly debunked by the likes of Bjorn Lomborg, author of “The Skeptical Environmentalist”.
Equally, it is true that manufactured goods, agricultural produce, money, and services are scarce. The number of industrialists, service providers, or farmers is limited – as is their life span. The quantities of raw materials, machinery and plant are constrained. Contrary to classic economic teaching, human wants are limited – only so many people exist at any given time and not all them desire everything all the time. But, even so, the demand for man-made goods and services far exceeds the supply.

Scarcity is the attribute of a “closed” economic universe. But it can be alleviated either by increasing the supply of goods and services (and human beings) – or by improving the efficiency of the allocation of economic resources. Technology and innovation are supposed to achieve the former – rational governance, free trade, and free markets the latter.

The telegraph, the telephone, electricity, the train, the car, the agricultural revolution, information technology and, now, biotechnology have all increased our resources, seemingly ex nihilo. This multiplication of wherewithal falsified all apocalyptic Malthusian scenarios hitherto. Operations research, mathematical modeling, transparent decision making, free trade, and professional management – help better allocate these increased resources to yield optimal results.

Markets are supposed to regulate scarcity by storing information about our wants and needs. Markets harmonize supply and demand. They do so through the price mechanism. Money is, thus, a unit of information and a conveyor or conduit of the price signal – as well as a store of value and a means of exchange.
Markets and scarcity are intimately related. The former would be rendered irrelevant and unnecessary in the absence of the latter. Assets increase in value in line with their scarcity – i.e., in line with either increasing demand or decreasing supply. When scarcity decreases – i.e., when demand drops or supply surges – asset prices collapse. When a resource is thought to be infinitely abundant (e.g., air) – its price is zero.

An interesting way to provide a sustainable level of energy security is to promote renewable energy technologies, avoid the lock-ins that exist in our energy investment decisions and better understand and control the energy demand. Moving to this point requires imposing a higher price on fossil fuels, supporting alternative energies, lowering fossil fuel subsidies and last but not least managing the energy demand in a more effective way. We now need to secure strong legislative and subsidy frameworks to support the alternative energy industries and avoid energy wastes which are costly both for our wallet and the planet.

Since decisions to invest in major energy infrastructure are sensitive to changing trends in carbon and energy prices, we believe that setting long term binding emission and renewable energy targets can provide the right signal. In this regard, carbon markets, tradable green certificates or feed-in tariffs are among the best mechanisms to ultimately ensure a long term energy supply.

Energy security is unthinkable without trust. Therefore, there is a need in rebuilding confidence in a set of global rules and cooperative approaches that reconcile competing stakeholder interests, especially on fair access to energy supplies and energy infrastructure, both on a national and global level.

That might be achieved through:

Creation of a truly international energy organization, taking into account the vital interests of the key stakeholders (private sector, governments and civil society). Its mandate and scope of action should be broader than that of the current IEA and it must provide binding rules for access and supply, and better regimes for emergency response.

Introduction of a ’safety network’ on a local and national level – energy welfare should involve domestic policies for poorer communities and international assistance packages for poorer countries.

‘Energy security’ is now broadened further to include the idea of ‘keeping the lights on’ through green sources of supply, such as wind and wave power. The difference with the first approach is that the latter dovetails with the idea of a long-term, sustainable societal security, one that is compatible with climate change objectives.

In both these approaches ‘energy security’ gives rise to the question of the mechanism. Pipeline politics, for example, has its own version of security studies, how to protect the physical infrastructure etc. through geopolitics. In green approaches, the issue is also one of physical infrastructure, but it is more about the reliability of the technology.

There is a third, less obvious but still important meaning of energy security. Security, generally, is also about perception – do people feel secure? If people feel insecure then genuine insecurity can result. Fears about the impact of climate change are growing. Protestors are taking to the streets to express their concerns. These issues have long dogged the nuclear industry but a same type of politics is now coalescing around the use of hydrocarbon fuels. The question of the mechanism also arises here: what can be done to make people feel secure, not about the security of supply, but about the effects and consequences of, possibly, even abundant supply, a problem of what George Bataille once called ‘the accursed share’.

International relations, more generally, has recognized these problems. Growing out of the ‘risk society’, the Aarhus Convention on environmental participation is one approach that recognizes that ‘sustainable’ technologies have somehow to be grounded in widespread public acceptance. No doubt, Aarhus is limited, and somewhat bureaucratic, but the general idea that energy security has to address, at some point, the perceptions of security surrounding energy supplies is a valid one. The Aarhus mechanism is about disseminating accurate environmental information, allowing for participation and reassurance, the sense that it is important that societies support the direction and efforts of government and companies.

Security of supply, whether from old or new technologies, will remain the biggest issue. But solutions to the problem of supply will need both to make societies more energy secure and feel energy secure, a process which has to be beyond merely massaging public opinion.

First, investing in small-scale production capacity must be made an attractive proposition for the small-scale consumer. Subsidising the cost of such technology with a payment for every unit of energy it produces is a model that successfully launched the market for photovoltaic panels in Europe. Another regulatory measure was put forward by the European Parliament’s Industry, Research and Energy Committee on 31 March: oblige all new buildings to be “net zero energy” within 10 years, meaning that they will need to have low energy demand (for example, by being well-insulated) and that any energy they do take in from, say, the electricity grid, they make up for by re-injecting an equivalent amount from small-scale generation equipment installed on-site, like photovoltaic panels.

Secondly, technology is needed to manage the flows of small amounts of electricity to and from a huge number of producer-consumers spread across the grid. This technology is usually collectively referred to as “smart grid technology” and includes meters that can respond to the real-time price of electricity on electricity exchanges, the information and communications technology that relays this information to them, and chips in white goods such as fridge-freezers that enable them to consume more or less power depending on what the smart meter is telling them. Incentives to roll out this technology are needed from public authorities.

Thirdly, to accommodate electricity production from renewable energy sources (which often cost nothing and don’t need to be imported into Europe), a willingness is needed to invest more in electricity grid infrastructure. This will enable electricity to be moved from areas where it is being generated in abundance to areas where demand is running ahead of supply.