Domestic Energy security cannot be bought at the expense of others

After years during which the climate crisis dominated the agenda, the war in Ukraine has pushed energy security to the top of the global concerns.

But what is energy security? And security for whom? This is an important question that demands our attention if we are to avoid a deeper global energy crisis in the coming years.

Energy security is often viewed through the lens of narrow national interests, but at the International Energy Forum (IEF) our responsibility is to the entire world community and the stability of the global market. So, we view energy security not as a national concern, but a global priority that must be addressed through global action. It cannot be a zero-sum game where the winner takes all. Over recent months we have witnessed several countries and economic blocs pursuing unilateral energy security, seeking to secure short-term supplies at all costs, with no commitment to long-term investments that would underpin long-term security. If the geopolitical shock caused by Russia’s invasion of Ukraine leads to panic buying of scarce energy resources without an investment in new long-term supply, these efforts to enhance energy security will inevitably make the global energy crisis even worse. True energy security cannot be seen as a quick fix, and it cannot be bought at the expense of others. It requires investment in long-term partnerships and in reliable and diversified energy supplies.

Unfortunately, investment in new energy supply has been below the level needed to support demand for two years already. The collapse in investment coincided with the onset of the pandemic, but has persisted even after the sharp rebound in demand post-pandemic. This can be explained by deepening uncertainty over the long-term energy market outlook, reduced capital allocations by companies and investors and restrictions on multilateral finance for fossil fuel projects.

The focus of attention today is on Europe, which is moving quickly to replace Russian oil and gas supplies, and now looks likely to survive this winter without unexpected blackouts. But, in fact, developing countries are bearing the brunt of the energy crisis. Over recent months we have documented severe shortages of gasoline, diesel, cooking gas and electricity across more than two dozen developing countries. As more LNG flows to Europe, many consumers in the developing world, including India, have been priced out of the market for gas.

According to our latest research on oil and gas investment trends with S&P Global, upstream investment in oil and gas needs to increase from $499 billion in 2022 to $640 billion in 2030 to ensure adequate supplies. This estimate for 2030 is 18% higher than we assessed a year ago due primarily to rising costs. A cumulative $4.9 trillion will be needed between 2023 and 2030 to meet market needs and prevent a supply shortfall, even if demand growth slows toward a plateau. Continued upstream investment is needed more for offsetting normal production declines than meeting future demand growth. Without additional drilling, we estimate that non-OPEC oil production would decline by 9 million barrels per day by 2026 and 17 million barrels per day (or 31%) by 2030. It would be easy to assume that since crude oil prices have eased recently from their highs, that we are past the worst and re-entering a period of relative calm in global energy markets.

I am afraid this would be a dangerous misreading of the situation. I see the current market situation as a false calm. Some ministers of IEF countries I speak with are concerned that the scramble for energy supplies we are witnessing today could lead to a zero-sum contest for resources this year and next that could trigger an even deeper crisis, on the scale of the 1970s oil market shock. Governments must recognise that the transition to net-zero emissions is not a cliff edge and will not happen overnight. They must ignore calls to cut off investment in the world’s largest primary energy sources before a real alternative exists.

According to the 2020 IEA technology report, half of emission reductions required by 2050 will come from technologies that don’t exist or are not commercially viable today. So we must increase investment in oil and gas, while simultaneously scaling up of decarbonisation technologies, tackling methane leaks and fixing the global market in carbon credits to support carbon sinks and finance clean energy investment in the developing world. We must all work together to avoid escalating an already serious energy crisis, and this means taking a holistic view of energy security, not as an individual right, but as a global public good that requires long-term investment and partnerships.