Academic journal article Management & Marketing

Energy Security: Between Markets and Sovereign Politics

Academic journal article Management & Marketing

Energy Security: Between Markets and Sovereign Politics

Article excerpt


Energy security is a common strategic objective in the energy policy of states. For net importing countries, it refers in the first place to the security of energy supply, which in turn has to do with a state's ability to secure the needed energy imports from various sources and through various conduits at an affordable price. For net energy exporting countries, energy security designates rather the state's ability to secure and maintain market share.

Either way, there is an intrinsic political element to energy security, as international energy trade puts producer, transit, and consumer countries in relations of mutual (though not necessarily symmetrical) dependence, which are prone to being politically instrumentalized. Besides, as Shaffer (2009, p. 3) notices with respect to the international oil trade,

"Energy use affects the structure of the international system itself: oil use creates an element of interdependency in the international system. Since oil is a global commodity, each country's demand affects the price and supply availability of oil for all consumers."

Seen from the vantage point of the main actors at the international level (states, organizations and corporations), one paradigmatic approach to energy security is the market-driven one, which relies on inclusive, competitive and transparent international markets for ready access to energy. In a market-based environment, both pricing and flows of energy are optimized through the unhindered equilibrium of supply and demand. Accordingly, energy becomes a foremost commodity, delivered by profit seeking suppliers, and energy security risks are managed similarly to portfolio management on the capital markets (der Linde, 2008), with portfolio diversification and hedging contracts as instruments of risk mitigation.

As a matter of fact, the radicals in this camp, such a Pierre Noel (2008), dismiss the concept of energy security altogether, arguing that energy trade is shaped by market forces alone, with no substantive role to play for politics and geopolitics. There is a naïve ring to this claim, unless one reads it as implying that, in spite of the appearances, state action in the energy realm, domestically and internationally, is ultimately shaped by market fundamentals.

Obviously, the market-driven approach to energy security relies on a number of idealizations: it assumes an economic environment readily responsive to price signals, low barriers to international energy trade, sufficient infrastructure capacity, as well as widely accepted norms, rules, and procedures that regulate investments, contracts, conflict resolution etc. As such, it approximates to a large extent the liberal view of free trade, with competitive energy markets reinforcing robust and efficient supply mechanisms. As shown in the next section, the market-driven regime of international energy trade was in place in the 1990s for less than a decade of functional quasi-purity, anchored in a broad international consensus. For the rest, it either displayed familiar practices of oligopolistic market and price control, or has taken strokes from the rivaling state-centered, geo-politicized approach to international energy trade.

In a countervailing simplification, the geopolitical approach to energy security revolves around the notion of national interests and state-centered foreign policy action, turning energy into an instrument of political influence. Energy trade is seen as subordinate to hard power interests, and security planning prevails over market development. As such, it approximates to a large extent the realist view of international affairs, with its focus on state power and relative gains - as it is suspicious of the economic gains made by other states (Grieco, 1988) -, while the liberal view embraces the notion of prosperity based on absolute gains resulting from mutually advantageous economic arrangements (Axelrod and Keohane, 1985).

The nationalization of energy resources in energy exporting countries, especially in the 1960s and 1970s, and the creation of national state-controlled companies in the developing world have, as shown in the next section, strengthened state interventionism in energy matters. …

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