Asias Energy Insecurity: Markets or Mercantilism

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Asias Energy InsecurityMarkets or Mercantilism

• Mikkal E. Herberg
• The National Bureau of Asian Research
• Conference on Remaking Economic Strengths in East
  Asia Dealing with the Repercussions of Increased
  Interdependence
  
• Institute of East Asian Studies
• UC Berkeley
• April 8-9, 2005

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Asian Oil and Gas Trends

• Oil demand, imports will drive global market
• 75 of recent growth, 50 of future growth
• Economic growth, rising per capita incomes
• Motorization, vehicle boom
• Poor production prospects
• Weak demand management policies
• Asian state energy security policies reflect
  fears over global oil outlook, regional mistrust
  
• Responding with increasingly aggressive Energy
  Nationalism regional cooperation weak
  
• Will become major force on global oil markets
• Gas import dependence likely to reinforce this
  trend

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Asia 75 Global Oil Demand Growth 1990-2003

• World Asia China
• 1990 1,097 837 -6
• 1991 63 606 158
• 1992 641 971 252
• 1993 -321 687 251
• 1994 1,401 1,117 232
• 1995 1,106 939 245
• 1996 1,498 774 282
• 1997 1,827 812 263
• 1998 381 -429 112
• 1999 1,633 926 369
• 2000 846 810 569
• 2001 443 105 45
• 2002 705 582 349
• 2003 1,481 858 603
• 11,885 8,871 3,729

Source BP
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Asias Oil Imports 1978-2003(MBD)
14.7
Demand
Imports
4.5
Production
Source BP
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Asias Future Oil Import Needs

• Imports
• 14.4
• 2030 36.0

Source IEA WEO 2004
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Chinas Oil Imports Rising
Source IEA WEO 2004
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Asia and Mid-East Exports (MMBD)

• 2001 2020 Change
• Total ME Exports 16.2 25.2 9.0
• Asia 9.4 16.8 7.4
• North America 2.8 3.2 0.4
• Western Europe 3.1 3.9 0.8
• Other 0.9 1.3 0.4
• Asia Share 58 67

Source IEEJ 2004
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Asias Natural Gas Imports2002-2030
2002 2030 SE Asia to NE Asia 69 104
Persian Gulf to NE Asia 29 57 Alaska
to NE Asia 1 0 SE Asia to China
0 10 Persian Gulf to China 0 1
3 Persian Gulf to India 0 44 Russia t
o NE Asia 0 22 Russia to China
0 19 Total 99 269 of which Per
sian Gulf 29 114 Russia 0 41
Southeast Asia 69 114

• Total Asian gas imports nearly triple
• Imports from outside region rise five-fold
• Outside import share rises from 29 to 58

IEA WEO 2004
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Policies Driven by Fears over Long-Term Oil
Environment

• High prices, uncertain supply outlook,
  scarcity
  
• Growing import dependence, transit bottlenecks
• Fears of worsening instability in PG, other
  producers
  
• Terrorism threats producers, transit corridors
• Destabilizing US war in Iraq, threats to Iran
• Rising Russian energy nationalism, capricious
  policy
  
• Overlay of Asian regional rivalries, lack of
  regional security institutions
  
• Fears over peaceful rise of China
• Chinas suspicion of U.S. energy encirclement and
  U.S.-Japan Alliance

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Response Energy NationalismToo Important to
be Left to the Markets

• Asian powers aligning strategic ties to energy
  needs
  
• Bilateralism rather than regional or
  multilateral
  
• Oil and gas diplomacy and alliances with
  exporters
  
• Regional competition for oil supplies, fields
• Competition to control transportation maritime
  routes
  
• National competition for global equity supplies
• China
• Japan
• India
• Self-help SPRs in China, India
• Limited progress in regional cooperation

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Gas Geopolitics and Asia

• Gas trade likely to reinforce same supply
  security concerns as oil
  
• Same outside suppliers, similar geopolitical
  issues
  
• Persian Gulf - Qatar, Oman, Yemen, Iran, UAE
• Russia -- Sakhalin 1 and 2, Irkutsk pipeline,
  possibly W. Siberia
  
• Possibly Central Asia -- Kazakhstan, Turkmenistan

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Implications

• Mercantilism trumping markets in energy security
  strategies
  
• Energy is fueling geopolitical rivalries rather
  than cooperation
  
• China, Asia to become big players in global
  energy geopolitics
  
• Persian Gulf
• Central Asia
• Russia
• OPEC
• Competition looming for U.S. geopolitical primacy
  in key regions
  
• Russias role in Asia will grow present policy
  aggravating tensions
  
• Zero-sum scramble risks disrupting global oil
  markets as demand booms
  
• Inflating prices in global EP market
• Changing competitive landscape of global EP -
  IOCs
  

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Long-Term Questions

• Asia is where the Industrial Countries were
  during 1973-74 oil shock
  
• Will Asia, China move up learning on energy
  markets?
  
• China is key to this
• Cannot possibly meet needs bilaterally
• Similar to trade WTO progression?

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U.S. Policy Issues

• Likely source of tension in U.S.-Asia relations
• U.S.-China
• Sudan, Iran, sea-lanes, Taiwan
• Chinas role in Persian Gulf, ME likely to grow
• New involvement Latin America, Canada
• U.S.-Japan
• New source of strain in Alliance Iran nukes
• U.S.-Russia
• Energy reinforcing nationalism
• Energy ties to Asia seen as alternative to U.S.
  dominance
  
• US Government and Company concerns over Asian
  NOCs competition

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Background
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Cumulative Gas Demand Growth 2001-2030
IEA WEO 2004

• Asias gas demand to nearly triple by 2030

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