Energy Security Risks and Risks Mitigation: an Overview

Central to the goals of competitiveness and sustainable development is the issue of energy. Is there enough? Where will it come from? What will it costs? Is its production and use environmentally sustainable? Many of these questions are now discussed under the general topic commonly referred to as “energy security.” This paper discusses more specifically what is meant by “energy security” and provide some reasons why it has been so difficult to forge a common approach to its achievement. A key factor includes substantively different views amongst countries on the optimal role of the market mechanism, the private sector, and governments either as an owner or regulator. Although different types of insecurity are discussed the focus in this paper is on the long-term physical availability of energy supplies. Interestingly, it appears that long-term security is not just an issue for consuming nations but also for the supplying nations due to concerns that future markets might not exist which would justify massive long-term investments today. However, long-term commitments by consuming and producing nations could lower the risks faced by each. In order to achieve increased security, the consuming countries need to diversify the types of energy used and their geographical sources, yet in many ways the trends have been the opposite as the geographic concentration of energy reserves, especially oil and gas are projected to increase. The ability of countries to increase alternative sources, such as renewables or nuclear, have considerable potential in the long term but in the medium term are limited by technological, environmental and political constraints. For oil and gas which will remain for the near future the most important energy sources, the most immediate problem is not one of insufficient supplies under the ground, but the lack of either government resources for public development or of a sufficiently investment friendly environment for private sector development in those countries that have the reserves. In addition there are a number of other complementary issues that need to be addressed such as improving the transport infrastructure and enhancements for research activities and technology transfer.