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Access to Oil, Natural Gas Seen as Central to Global Stability
By David McKeeby


August 01, 2007

Washington - Reliable access to affordable oil and natural gas is a cornerstone of international security, but in today's energy market, disruptions in the supply chain can have thorny diplomatic and security consequences.

"We have a serious problem, America is addicted to oil, which is often imported from unstable parts of the world," President Bush said in a State of the Union address.

Energy independence, long touted by U.S. officials, is a goal that might be achievable through technology advances. But for the foreseeable future, security and energy experts agree, fossil fuels and the integrated global supply chain that delivers them to global markets will make "energy security" a critical transnational concern for the 21st century.

The world currently consumes approximately 86 million barrels of oil per day, and the U.S. Energy Information Administration (EIA) projects that by 2030 demand will grow by nearly 50 percent, to 118 million barrels per day. EIA expects that as much as 70 percent of this growth in demand will come from emerging economic and political powers, like China and India.

The United States produces 70 percent of the energy resources it uses and it remains the world's single largest consumer of petroleum products, using 20 million barrels per day, according to EIA.

As domestic oil production continues to decline, EIA estimates that the United States will be importing 27 million barrels per day by 2030, if circumstances remain the same.

"The scale and scope of this challenge threatens our long-term security," Energy Secretary Samuel Bodman said in a February speech. "And that threat only promises to grow more pressing over time as traditional sources of energy become more stretched and demand continues to grow."

For this reason, says Daniel Yergin, president of international energy consulting firm Cambridge Energy Research Associates, lawmakers must look beyond fossil fuels as a mere commodity.

True energy independence, Yergin argues, is best found in an energy security system that is rooted in market stability and international cooperation in responding to global supply disruptions.

For years, the international community has worked to avoid disruptions by seeking multiple supply sources, encouraging open markets and maintaining strategic reserves. These are necessary, but insufficient, steps to ensure future energy security for three reasons, Yergin argues.

First, exploration is expanding into more remote and potentially unstable regions of the world, he said. Even in leading energy production regions, like the Middle East and Latin America, future political turmoil could endanger global energy supplies.

Second, as new sources of energy are discovered farther away from consumers, the world would see a rapid expansion of infrastructure -- like pipelines, refineries and ports - that is a potentially attractive target for terrorists, guerillas and organized crime. Natural disasters also would pose a threat to this infrastructure, Yergin said.

Many global shipping routes, such as the Straits of Hormuz in the Gulf or the Straits of Malacca in Southeast Asia, make tanker traffic vulnerable to terrorists and piracy, he said. On land, pipeline projects increasingly cross multiple borders, compounding calculations of political risk for companies that have sizable investments in getting oil and gas safely to market.

The third challenge to energy security, Yergin said, is the lack of transparency in the market processes. Bodman said that half of the world's oil reserves are in the hands of state-owned energy companies, which do not respond to market demand in the same manner as private multinational oil companies.

John Deutsch, a former director of the CIA who now teaches at the Massachusetts Institute of Technology, agrees. In recent congressional testimony, he said that state ownership can be advantageous, such as Saudi Arabia's work in the Organization of Petroleum Exporting Countries to moderate global prices. But, he cautioned, it also can result in abuses, such as some suppliers threatening energy cutoffs to achieve political objectives or others outbidding private energy companies by forming energy deals that include additional government-to-government benefits, such as economic aid and arms sales.

Bodman said that these factors all add up to one simple point -- international cooperation is essential to meeting the global energy security challenge: "We cannot let energy become a variable, a risk, a question mark in our nation's - or our world's - economic and security equation."









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