NS4053 Fall Term 2013 Daniel Yergin – Energy Security

1. NS4053 Fall Term 2013Daniel Yergin – Energy Security

2. Daniel Yergin: Ensuring Energy Security I • Energy security a major issue since Churchill’s time – shifting British Navy from coal to oil • Churchill’s advice: “Safety and security in oil lie in variety and variety alone” • Energy security focus often driven by tight oil markets and high oil prices, but new concerns in recent years: • Power blackouts more common • Increased risk of terrorist attacks to energy infrastructures • Instability in many producing countries • Increased threat posed by Iran • Natural disasters seem to be more frequent

3. Daniel Yergin: Ensuring Energy Security II • “Energy Security” means different things for different countries: • Developed world – availability of sufficient supplies at affordable prices • Energy exporting countries – security of demand for exports • For Russia, aim is to reassert state control over strategic resources and gain primacy over main pipelines to international markets • For China and India – their ability to rapidly adjust to their new dependence on global markets after long standing commitments to self sufficiency • For Japan – how to manage dependence on imported natural gas -- • For many countries – whether to build new nuclear plants and perhaps return to clean coal • For Canada -- access to U.S. and Chinese markets

4. Daniel Yergin: Ensuring Energy Security III • Main principles for energy security • Original energy security system created in response to 1973 Arab oil embargo • International Energy Agency (IEA) created • Intended to ensure coordination among industrialized countries in the event of supply disruption • Encourage collaboration on energy policies • Avoid hostile scrambles for supplies and • Deter any future use of an oil weapon by exporters • Early actions to increase energy security • Strategic petroleum reserve • Encourage increased exploration, technology, alternative energy

5. Daniel Yergin: Energy Security IV To maintain energy security – key principles • Churchill’s diversification of supply still important • Oil is abundant and peak-oil not yet a problem • Resilience – develop a security margin in the energy supply system – buffer against shocks • Recognize reality of integration – there is only one oil market -- a complex and worldwide system • For all consumers, security resides in the stability of this market • Importance of information • High quality information underspends well-functioning markets • IEA has led way in improving flow of information about world markets and energy prospects