How will changing patterns in global energy consumption affect US security and the effectiveness of its military? Today, the Strategic Studies Institute profiles these patterns – including developments in China, India and elsewhere – in order to assess how the US might respond.
By Editor: John Deni for Strategic Studies Institute of the US Army War College (SSI)
This is an excerpt from New Realities: Energy Security in the 2010s and Implications for the US Military
China’s Burgeoning Demand and its Quest for Resources
Michal Meidan
China’s energy profile is changing rapidly. After years of breakneck economic growth and ravenous appetite for natural resources, the Chinese government has committed to putting China on a more sustainable development path. Beijing has introduced energy efficiency goals and policy measures aimed at reducing China’s carbon footprint by increasing the share of non-fossil fuels to 15 percent of the Chinese energy mix by 2020 and raising the share of gas in the country’s energy mix from roughly 5 percent in 2010 to roughly 12 percent in 2020.
But even though renewable energy and nuclear technology will gradually offset demand for coal, China’s continued dependence on oil and rising demand for gas—that it will be incapable of supplying wholly from domestic sources—will sustain a high dependence on imported resources. With China’s domestic oil production stagnating, the International Energy Agency (IEA) expects its import dependence ratio to reach 80 percent in 2030. Beijing has over the past two decades made efforts to diversify its sources of imported oil, but it has only managed to tinker at the margins with its heavy reliance on the Middle East and Africa. China remains dependent on six countries for over half of its oil supplies: Saudi Arabia, Angola, Iran, Russia, Oman, and Sudan. And as demand for imported oil and gas will continue to grow, supply security will remain a prominent feature of China’s energy strategy and its foreign policy calculus.
China’s reluctance to rely solely on imports has led to heavy investments overseas in oil and gas resources, ranging from Sudan to Canada, through Iran and Iraq. Government support for these investments has benefitted China’s commercial actors that have sought to become globally competitive energy producers and traders. Yet this has done little to enhance the country’s supply security: Chinese traders behave according to market dictates for the most part and sell the resources they produce to the highest bidder. Aware of the numerous vulnerabilities it is exposed to, Beijing is trying to diversify not only its supply sources but also its supply routes. While the military has been promoting the need to secure maritime transportation as a means to build its naval capacity, Chinese decision makers have also sought to build cross border pipelines through Myanmar, Central Asia, and Russia in a bid to reduce oil flows through the Straits of Malacca. For all its attempts to purchase assets, “lock in” resources, reduce reliance on maritime transports, and secure sea lanes of transportation, no strategy – as Beijing and its companies are learning – is infallible. The reality remains that much of the oil and gas that is vital to China’s economic growth will continue to be produced in volatile countries, traded on international markets, and flow through sea lanes that ultimately pass through the Straits of Malacca.
The sum of these diversification efforts is a growing global footprint. Yet China has neither the intention nor the capacity to safeguard its interests worldwide. Moreover, China is not ready to assume the United States’ role as provider of public goods such as freedom of navigation in international waters, or to secure the stability of producer countries. Beijing’s preference therefore will remain to free-ride on indirect U.S. security guarantees. With the limits of this preference becoming increasingly palpable, China will begin to experiment with a model of reluctant and narrowlyfocused participation in third countries. This presages an era of rising coordination, but also friction, with the United States.
New Trade Routes, New Conflicts?
Michael Klare
International competition for control over vital sources of energy has been a source of conflict throughout human history. Conflict has arisen from struggles over both the major reserves of energy resources and the supply routes used to transport energy from supplying to consumer countries. Protecting such routes has, in fact, been a long-standing mission of U.S. military forces, especially in the greater Middle East. It appears, moreover, that the protection of energy supply routes will continue to play an important role in the strategic planning of the major energy-importing nations. The strategic importance of international energy supply routes derives from the vital importance of energy to modern industrial economies and the fact that many of the world’s major reservoirs of oil (and other key sources of energy) are located at some remove from the major energy-consuming nations and so must be carried to consuming nations via an extended, often vulnerable network of delivery systems – oil and gas pipelines, seaborne commerce, electrical transmission lines, and so on. By their very nature, these international supply systems are vulnerable to blockage or disruption: they are long, relatively fragile, and traverse a world with many foci of conflict. Much of the world’s traded oil, for example, is carried by unarmed tankers across the Persian Gulf and through the Strait of Hormuz – a narrow oil “chokepoint” lined on one side by Iranian missile batteries and naval facilities. Pipelines, shipping routes, and transmission lines are also vulnerable to attack from terrorists, insurgents, and pirates.
Because of these supply routes’ vital nature and vulnerability to attack, their protection has long been viewed by importing states as a matter of national security. For the United States, this perception first arose during World War II, when President Franklin D. Roosevelt forged an alliance with Saudi Arabia aimed at ensuring unimpeded access to the Kingdom’s massive oil reserves. To ensure the safety of the sea routes used to transport Saudi oil to the United States and its allies, Roosevelt laid the groundwork for a permanent American military presence in the Persian Gulf area.
Ever since the Roosevelt administration, U.S. efforts to ensure the safety of imported energy have largely focused on protecting the flow of oil from Saudi Arabia to international markets. This remains one of the principal missions of the U.S. Central Command (CENTCOM), established in 1983 in accordance with the “Carter Doctrine,” which states that the safe flow of Persian Gulf oil is a vital U.S. national interest. But while the Gulf remains the major focus of U.S. efforts to ensure the safe delivery of oil, American leaders have also extended such operations to other areas, including the Caspian Sea region and West Africa.
Many of the initiatives undertaken by American leaders since 1945 to ensure the safety of energy supply lines remain in effect today. But the global energy security equation is now experiencing dramatic change. Among the most significant changes are:
(1) A shift in the center of gravity of world oil consumption from the older industrialized nations of the Organization for Economic Cooperation and Development (OECD) to the developing nations of Asia, especially China and India. (2) A shift in import dependence from existing reserves of oil and gas to newly-developed deposits in “frontier” regions, such as Siberia, Central Asia, the Arctic, and deep-offshore areas. (3) A shift in the geological sources of fossil energy from readily accessible “conventional” supplies to less accessible “unconventional” fuels, such as Canadian tar sands, Venezuelan extra-heavy crude, and hydrocarbons derived from shale formations.
There is no question that these shifts will result in alterations to the world’s energy supply systems. The question thus arises: To what extent (if any) will these changes generate new sources of conflict that may subsequently involve the application of U.S. military power? It is too early to provide a definitive answer to this question, but it is possible to identify several problematic developments:
(1) China, India, and Japan are placing increased reliance on military means to ensure the safety of their seaborne energy trade in the Indian and Pacific Oceans. China, for example, is expanding its deep-sea naval capabilities and acquiring experience in distant sea operations. India is also expanding its naval capabilities, and has adopted a new naval strategy focused on the protection of maritime trade routes in the Indian Ocean. Japan – worried about China’s naval buildup – is enhancing its own military capabilities. These, and other such endeavors, are generating fresh tensions among these countries (and their neighbors), leading to an increased risk of confrontation and crisis in the Asia-Pacific region.
(2) Russia, with the largest known oil and gas reserves in the Arctic region, is enhancing its capacity to defend its Arctic energy reserves and associated trade routes. This includes the formation of a new Arctic combat group and the establishment of additional bases along Russia’s northern rim. Canada and Norway – worried by the Russian military buildup – are taking comparable steps. Canada, for example, has announced plans to build a new fleet of ice-hardened patrol ships, while Norway has moved its combined military headquarters to Bodo, above the Arctic Circle.
(3) China, concerned about the safety of the pipelines it is building to transport oil and gas from Kazakhstan and Turkmenistan, is enhancing its ability to conduct military operations in Central Asia (largely under the auspices of the Shanghai Cooperation Organization). Russia, equally concerned over the safety of oil and gas pipelines in Central Asia (many of which are connected to the Russian oil and gas pipeline network), is also bolstering its military capabilities in the area.
Given these developments, it is safe to conclude that the establishment of new energy supply routes is generating new threats to international peace and stability. Whether or not these tensions will escalate into something more serious cannot be foreseen, but they are certainly contributing to an expansion of military capabilities in areas of potential friction and conflict.
For the U.S. military, this implies a possible reallocation of forces to ensure the safety of the new supply routes and/or greater cooperation with other states to achieve this objective. It also suggests a need for greater international cooperation to reduce the risk of unintended escalation of local crises and disputes. Finally, it raises the question of whether increased reliance on renewable sources of energy would serve U.S. interests by reducing American reliance on imported supplies of energy.
Prospects for Energy Efficiency
Pramod Khargonekar
Driven by global population increase (from 7 billion to 9 billion in 2050), economic growth and societal needs in the developing nations, and continued needs of the industrialized countries, demand for energy is expected to grow significantly in the coming decades. While estimates vary and are inherently uncertain, the International Energy Agency (IEA) estimates that by 2035, primary energy demand will grow roughly 30-35 percent with most of the growth coming from the developing countries. As we confront the challenges in meeting this increased demand, energy efficiency holds enormous potential.
Just in the United States, data from the Energy Information Administration (EIA) suggest that less than 37 percent of primary energy goes toward useful energy services. Many studies have been conducted on estimating the gains from energy efficiency based on technological and economic feasibility. The 2009 report on energy efficiency from the National Academies (specifically, the National Academy of Sciences, the National Academy of Engineering, and the National Research Council) entitled “America’s Energy Future,” estimates the potential for cost-effective annual energy savings in the United States by 2030 to be between 30 (conservative) and 35 percent (optimistic). The largest contribution (more than half) to these savings comes from residential and commercial buildings. Transportation sectors and industry sectors account for much of the rest.
The potential for energy savings can only increase with advancements of new technologies for building heating and cooling, lighting, windows, gasoline/diesel engines, hybrid and electric vehicles, refining, and production of metals (aluminum, steel), cement, chemicals, and paper. Beyond these, cross-cutting technologies such as combined heat and power (CHP), high temperature and separations processes, materials (nanocoatings, nanoceramics, refractory materials, insulation), sensors and process controls, electric motors and drives also offer great promise for energy efficiency gains.
Experience over the last three decades shows that policy tools are critically important for successful adoption of energy efficiency technologies and solutions. ENERGY STAR labeling, appliance efficiency standards, building codes, Corporate Average Fuel Economy (CAFE) vehicle efficiency standards, utility and end-use efficiency programs, CHP initiatives, and so forth are excellent examples of successful policies and programs.
A report from the California Energy Commission in 2007 suggests that energy efficiency contributed the equivalent of 15 percent of annual electricity usage in California in 2003, providing compelling proof for well-designed policy measures. Globally, the IEA estimates that more than two-thirds of potential gains from energy efficiency remain unrealized.
Despite the compelling case for energy efficiency, investments in energy efficiency are much lower than what can be easily justified on the basis of economic gains. This is the so-called “energy efficiency paradox.” There are three types of impediments or barriers to implementation of energy efficiency:
1. Structural
2. Behavioral
3. Availability
Examples include regulatory barriers, upfront capital investments, split or misaligned incentives, fragmented or diffused opportunities, ownership transfer before capturing full benefits, adverse bundling, and a lack of awareness and education. Policy and programs can and should be designed to address these barriers.
Expected growth in global energy demand will add further pressure on energy security. From this point of view, energy efficiency can be a major tool for energy security as it clearly reduces dependence on unreliable sources of energy, which in turn is likely to have a significant impact on U.S. national security. The above-mentioned 30-35 percent reduction in energy consumption in the United States can easily offset the increase in energy consumption due to population increase and economic growth. But strong, well-designed, and consistent policy and programs will be necessary to realize this potential.
The Changing Calculus of India’s Energy Security
Tom Cutler
India’s growing demand for energy and its quest for energy security impacts U.S. national interests in a variety of ways. Energy considerations were at the center of the transformation of the Indo-U.S. strategic relationship in 2005 with the announcement of the civil nuclear deal. Since then, cooperation in clean energy has been a driving force in taking the Indo-U.S. energy relationship to a new level. Looking ahead, it appears that Indian concerns about its energy security, including its desire to import U.S. liquefied natural gas (LNG), will come to the forefront as its growing import dependence and America’s growing energy self-sufficiency change the calculus of India’s energy security. This changing calculus of India’s energy security will have important implications for U.S. military planners.
Although slowing, India’s annual economic growth rate of around 8 percent in recent years has fueled dramatic increases in its demand for energy. Even though its per capita energy consumption is about only one-third of the global average, India is now the world’s fourth largest energy consumer. India’s demand for energy is expected to double over the next 20 years supplied by growing consumption of high-ash coal-fired power and increased imports of oil, natural gas, coal, and uranium. India’s import dependence from 2010 to 2035 is projected for each of the primary fossil fuels as follows: coal’s dependence doubles from 16 percent to 33 percent, oil jumps from 76 to 92 percent, and gas, mostly LNG, grows from 20 to 36 percent. Given the sheer scale of India’s energy needs – it will become the world’s most populous nation sometime in the 2020s – it is inevitable that its growing import vulnerability (which is the crux of India’s energy security challenge) will have regional and global impacts of military significance.
India’s export oriented refinery sector could be a supplier of fuel to U.S. forces deployed in the region. At the same time, India will look to the United States as a strategic source of imported LNG and, to a lesser extent, coal. Meanwhile, India’s energy footprint dominates South Asia, where the considerable potential for intra-regional trade in natural gas, hydro-power, and electricity remains unrealized. The precarious state of Pakistan’s energy sector represents an unpredictable threat to Indian and U.S. interests, especially if that nation destabilizes under the weight of its energy woes. South Asia has a looming energy crisis and long term energy security will not be achieved without intra-regional cooperation.
Looking outward from South Asia one cannot ignore India’s geographic location astride the sea lanes in the Indian Ocean where 70 percent of the world’s oil trade, 60 percent of LNG, and 70 percent of coal trade is transported, and where some predict the United States, India, and China will inevitably compete for blue water dominance. Indeed, the most important military implication of India’s growing energy needs is its increased reliance upon sea borne trade in energy and uncertainties regarding the future U.S. role as a guarantor of safe passage.
It is in the U.S. interest for India to be energy secure. But India faces many difficult challenges and its leadership will be under increasing pressure to satisfy its growing energy needs. Many of the solutions to India’s energy challenges require significant domestic political will. Controversial issues such as the adoption of true market pricing and privatization of key energy para-statals are all subject to the vagaries of India’s vibrant democratic process. But as imports rise India can no longer insulate itself from world energy markets and it will need to develop strategic alignments and expand its universe of international cooperation to enhance its energy security. This includes cooperation with the United States and the International Energy Agency (IEA) in regard to the development and use of strategic oil stockpiles and cooperation among major consuming nations in the event of an oil supply crisis.
As an emerging energy supplier and as a key ally of India with a number of proven bilateral mechanisms for energy cooperation already in place, the United States is well positioned to forge even closer civil and military ties to enhance mutual energy security.
Energy Demand and the Developing World
Deborah Gordon
The 2000s generally found energy demand leveling off in developed countries and taking off in the developing world. Between 1970 and 2010, global energy demand doubled and began to shift from the developed to developing regions. The aggregate share of energy consumption in the countries that comprise the Organization for Economic Cooperation and Development (OECD) shrank significantly from 60 percent to 41 percent, off a much larger base. The regions that grew their energy consumption most over the past 40 years include the Middle East, Asia, and Africa.
Future growth trends are expected to continue in this direction, with energy demand expanding faster in the developing world. As the citizens in the developing world become more affluent, modernization and mobility will increase. These trends, in turn, will increase energy consumption more rapidly in developing nations.
According to the International Energy Agency, between 2011 and 2035, world primary energy demand is projected to increase worldwide at an average annual rate of 1.3 percent. The OECD regions are expected to grow more slowly than the non-OECD. While the OECD currently consumes more energy than any other region, starting in 2025, it is anticipated that Asia in its entirety (including China) will demand more energy than the OECD nations combined. The share of energy consumed in the OECD is projected to contract from 40 percent to 32 percent through 2035, continuing a downward trend that began in the latter part of the 20th century. China, India, Brazil, Indonesia, the Middle East, and Africa are among the developing nations that are expected to experience the most rapid growth in energy demand in the years ahead.
Disaggregating demand by energy sources indicates significant changes ahead. Looking out to 2035, non-OECD nations will dominate energy consumption across the board—except for nuclear power. Electricity generation, powered by renewables and natural gas, is projected to increase in the OECD and take off in all developing regions. China will consume more electricity and coal than the entire OECD. Oil, gas, and coal consumption are projected to be comparable. More gas will flow to the developing world than the OECD. The developing world will become more dependent on oil and gas. As they continue to motorize, oil consumption is projected to expand across the board in all developing regions. Nuclear energy is projected to play a relatively small role meeting energy outside the OECD. All of these changes will play out against the backdrop of increasingly dynamic energy markets.
These factors all have implications for U.S. and developing country security. Overall, the developing world is projected to become less energy self-sufficient in the decades to come. The developing countries are planning to invest an estimated $23 trillion (2011 dollars) on energy infrastructure through 2035, nearly twice as much as OECD nations. Oil investments are projected to be distributed across all developing countries, while gas, coal, and power investments will be centered largely in Asia’s developing nations. These infrastructure investments will likely lock in energy consumption patterns through the middle-to-end of the century. Selecting energy investments wisely will be critical, but it will also be difficult. Setting electricity aside, many developing nations have a long history of massive fossil fuel consumption subsidies. In 2011, these subsidies approached $0.5 trillion—the majority in the Middle East, North Africa, and Asia.
Taken together, oil and gas will continue to dominate energy demand into the future. Transportation costs are a relatively minor part of the energy supply chain making fossil fuels easy to move around the globe. A wider array of nations will consume oil and gas resources while a select few will demand coal and nuclear power. As such, oil and gas trade will continue to grow—bolstered by the unconventional resources that are being tapped—and more suppliers will be vying for market share. While increased competition in oil and gas markets could ultimately be beneficial, growing global energy interdependence brings the risk of short-term supply interruptions. Moreover, organizing more market actors could lead to oil and gas price volatility, with associated energy and economic security impacts.
Geographic choke points for oil and gas will not disappear in the future. If anything, they could become even more concerning. Oil will move as crude and petroleum products and natural gas is moved by pipeline over land and increasingly liquefied moved by maritime shipping from continent to continent. By 2035, for example, a significantly increased amount of oil and gas could be moving through the Straits of Malacca and Hormuz.
Strategies that focus on reducing energy demand will not be adequate to ensure security in the future. In a world of growing fossil fuel supply availability, which is increasingly mobile through free trade agreements, reducing domestic energy demand will only facilitate energy movement. Lower energy transaction levels are manageable and can increase global security. At higher levels propelled by energy deficits in several developing nations, however, there are mounting risks of disruption due to economic, political, infrastructure, and environmental sources.
Energy demand in the 2010s and beyond will have significant impacts on the U.S. military. As energy trade continues to globalize, it will take more resources to maintain energy and economic stability throughout the world. Leadership will remain critical. At the same time, America will need to play an increasingly discerning, collaborative, and nuanced role in its dynamic and interdependent energy future.
Read the full paper.
Dr. John R. Deni is a Research Professor of Joint, Interagency, Intergovernmental, and Multinational (JIIM) Security Studies at the Strategic Studies Institute, U.S. Army War College. He previously worked for eight years as a political advisor for senior U.S. military commanders in Europe. While working for the U.S. military in Europe, Dr. Deni was also an adjunct lecturer at Heidelberg University’s Institute for Political Science – he taught graduate and undergraduate courses on U.S. foreign and security policy, NATO, European security, and alliance theory and practice. He is the author most recently of the book Alliance Management and Maintenance: Restructuring NATO for the 21st Century, as well as several journal articles.
Editor's note:
These executive summaries originally appeared in New Realities: Energy Security in the 2010s and Implications for the US Military published in January 2014 by the Strategic Studies Institute of the US Army War College. The publication is also available in the ISN Digital Library.
No comments:
Post a Comment