Monday, October 10, 2005

Global Oil Politics and the Energy Security in the Asian region

The oil price in the international energy market appears set to remain high for the rest of this year despite the attempt of the oil giants to increase production. The major sufferers of the price hike are those Asian countries whose dependency on Persian Gulf oil is alarmingly growing day by day. Meanwhile, the OPEC countries’ plan to revise the price band of oil to a higher level, currently set at $22-$28 per barrel, suggests that the international oil price would not come back to a ‘pre-Iraq level’. Is the ‘enormous’ energy demand by the Asian countries the fundamental reason behind the growing oil price in the world? It is felt that any attempt to secure energy supplies by Asian countries would be under continuous challenge from many forces around the world – the balance seekers of world power. The two hundred and ninety million people who live in the United States make up just five per cent of the world’s population, but they consume a quarter of the world’s oil supply. In this context, if the energy demand in the developed countries is compared with that of the Asian region the present oil demand of Asia can never be projected as a ‘demand shock’.

World Energy Situation
This year’s World Energy Outlook (WEO) by IEA predicts that the worldwide demand of oil will touch new heights with an increase of 1.6 per cent a year to 90 million barrels per day (b/d) in 2010 from the current 82 million b/d and to 121 million b/d in 2030. The major demand boom will be in the present energy-poor nations, especially the import dependent developing countries. According to IEA (Analysis of the Impact of High Oil Prices on the Global Economy, IEA, May 2004), the adverse economic impact of higher oil prices on oil-importing developing countries is generally more severe than for OECD countries. Since the growing oil prices will be a threat to the import dependent countries in the future, most of these nations would invest more on developing indigenous and traditional energy resources. Though this would not be helpful in avoiding the risk of oil dependency completely, it would give way in future energy investments to a reconsideration of the potential of other available energy materials. Simultaneously, to a great extent, investments in the field of nuclear energy would considerably increase in the Asian region which might be an eyebrow raising factor for the West. As noted, the growing price impact on the developing countries would affect the world economy in general. This would also reflect in the GDP of OPEC and its oil revenues, as higher prices would not compensate fully for lower production.

Zeroing in on the Asia-Pacific
As the recent WEO projects the rise of Russia as the ‘energy superpower’ in the coming years, the Siberian resources would be able to supply a notable quantity of oil to the East Asian markets. In the east, the Asian giants, Japan and China are involved in oil politics regarding the trans-Siberian energy pipeline from Taishet (previously the plan was to construct the line from Angarsk, but later the point of origin was changed by Moscow) in Siberia to the East Asian markets. Moreover, Russia is looking for a partner, which can make financial and technical support to the development of the oil fields in the Siberian region. The Russian energy pipeline has got a greater dimension since it can be an energy umbilical cord to the Asian Region. As the major energy consumers of the region, it would be the responsibility of both Japan and China to look for the fast realization of the energy pipeline. Both China and Japan must cooperate in this regard as well as to promote a pattern of constructive sharing of available energy resources in the region. As of now, this would seem to be a less practical idea due to different reasons including the information on the available quantity of resources in the Siberian region. Initiatives in this regard such as AMEM+3 (ASEAN Ministers’ Energy Meeting + China, Japan and South Korea) must be able to develop a collective bargaining to ensure adequate supply of energy to the Asian countries from the Persian Gulf and other energy rich areas of the world. The initiatives in energy cooperation would bring closer cooperation in many other fields including greater economic integration among the Asian countries.
In a meeting between American and Russian delegates on September 21, 2004, the Russian Minister of Economic Development and Trade, German Gref indicated that the US is a promising oil export market. This shows the possibility of large scale export of Siberian energy to the United States through the Murmansk port in Western Siberia. So far, the Russian plan is to exclusively export oil and gas in the Eastern Siberian region to the Eastern market mainly China, Japan and the Koreas. But any kind of energy politics over the pipeline construction by these countries would adversely affect the fast realisation of the same.

Politics of Energy Information
Energy security has been one of the most important issues of national interest to any import dependent country. Hence, the present political volatility in the Persian Gulf poses a major threat to the developing economies. Most experts are concerned with the economic impacts of energy security. But to a great extent the ‘politics of energy information’ has also been haunting the imported energy dependent countries for the past many years. The information regarding energy resources, availability, accessibility, transportation and costs etc., play a major role in the orbit of energy information in the world. The energy policy of a country and the future plans of resource development, energy investments etc., are largely dependent on the information available in the world. Today the information regarding the same has been largely manipulated by some of the interest groups. These interest groups include the energy dependent Western countries, energy companies that are active in the upstream and downstream energy activities etc.
According to Zbigniew Brzezinski, (Counselor, CSIS) America's security role in the Persian Gulf region gives it indirect but politically critical leverage on the European and Asian economies that are dependent on energy exports from the region. While on one hand the growing oil and gas consumption is projected as a major challenge to the developing economies of the world, on the other hand use of coal and the use of nuclear energy are brought under strict observation in the name of environmental security or nuclear non-proliferation. This approach of the developed world would adversely affect the overall development of the import dependent regions and in the longer run these restrictions would turn out to be critical impediments in their economic development. The developing economies of Asia have to seek all possible damage limiting measures in this regard. It may also include a wide range of measures like enhancing cooperation among the countries in the region in the creation of energy stockpiles, developing energy networks, effective sharing of resources, increasing energy efficiency and diversification of supply.