Rethinking EU energy security considering past trends and future prospects

Abstract

EU energy policy objectives are directed at three highly interdependent areas: energy supply security, competitiveness and decarbonization to prevent climate change. In this paper, we focus on the issue of energy supply security. Security of energy supply for the immediate and medium-term future is a necessary condition in the current context of the global political economy for the survival of the Union and its component member states. Since the Lisbon Treaty entered into force, energy policy no longer comes onto the agenda of the European Commission through the backdoor of the common market, environment and competitiveness. The Treaty created a new legal basis for the internal energy market. However, securing external supplies as well as deciding the energy mix, remain matters of national prerogative, though within the constraints of other parts of eu's legislation in force. Without a common defense policy, the highly import dependent Union and its members face external instability in the energy rich Arab Middle East and North Africa. Concern about energy security has been triggered by declining European energy production as well as the strain on global demand exerted by newly industrializing economies such as China and India and the Middle East, as well as the political instability in this reserve-rich part of the world. This paper explores the following two topics [1] the current situation and past trends in production, supply, demand and trade in energy in the eu, against the background of major changes in the last half decade and [2] threats to the security of the supply of oil and natural gas from import regions. Fossil fuel import dependence in the EU is expected to continue to increase in the coming two decades. As global trends show, and despite new fields in the Caspian region and the Eastern Mediterranean, conventional fossil oil and gas resources remain concentrated in fewer geopolitically unstable regions and countries (i.e. the Middle East and North Africa (mena) and the Caspian Region (cr) including Russia), while global demand for fossil energy is expected to substantially increase also within the energy rich Gulf countries. This combination directly impacts EU energy supply security. It should be noted that the trend towards higher levels of import dependence was not interrupted when the era of low energy prices, between 1980 and 2003, came to an end. Within the EU itself, domestic resistance to the development of unconventional resources is an obstacle to investment in unconventional sources in this part of the high-income world. This should therefore not put at risk investments in either renewables or alternative sources at home or conventional resources mainly in the Arab-Middle East. The situation is exacerbated by the spread of instability in the Arab-Middle Eastern countries. There are three domestic and geopolitical concerns to be taken into consideration: (1) In the Arab-Middle East, threats to EU energy supply security originate in the domestic regime of these countries. Almost all Arab resource-rich countries belong to a type of patrimonial, rentier-type of state-society relation. These regimes rely on rents from the exploitation of energy resources and the way in which rents are distributed. Regimes of this type are being challenged. Their economies show uneven economic development, centralized power structures, corruption and poverty at the bottom of the social hierarchy. The discrimination of females is a major obstacle to the development of the service sector. At present, even the monarchies fear the spread of violent conflict. Offshoots of these consequences have proven to cause civil unrest, exemplified by what optimists have called the 'Arab Spring.' (2) The second concern is the domestic and global impact of Sovereign Wealth Funds (swfs) managed by Arab patrimonial rentier states. swfs have proven to be an asset in both developing and developed economies due to their ability to buffer the 'Dutch Disease,' and to encourage industrialization, economic diversification and eventually the development of civil society. In patrimonial states, however, swfs are affected by corruption and the diversion of funds away from long-term socioeconomic development to luxury consumption by political elites. In fact, Arab swfs underpin the persistence of the Arab patrimonial rentier state system. (3) Finally, the post-Cold War, me and cea geopolitical landscape is shifting. The emergence of China and other Asian economies has increased their presence in the Middle East due to a growing need for energy and the expansion of Asian markets. The recent discovery of energy resources in the us has led to speculation that there will be less us presence in the region. There would be a serious risk to EU energy security if emerging Asian economies were to increase their presence in the Middle East as us interests recede.