Pawel Kopczynski / Reuters Steam billowing from the cooling towers of Vattenfall's Jaenschwalde brown coal power station is reflected in the water of a lake near Cottbus, eastern Germany December 2, 2009.

The New Energy Order

Managing Insecurities in the Twenty-first Century

The last decade has seen an extraordinary shift in expectations for the world energy system. After a long era of excess capacity, since 2001, prices for oil and most energy commodities have risen sharply and become more volatile. Easy-to-tap local fuel supplies have run short, forcing major energy consumers to depend on longer and seemingly more fragile supply chains. Prices have yo-yoed over the last 18 months: first reaching all-time highs, then dropping by two-thirds, and after that rising back up to surprisingly high levels given the continuing weakness of the global economy. The troubles extend far beyond oil. Governments in regions such as Europe worry about insecure supplies of natural gas. India, among others, is poised to depend heavily on coal imports in the coming decades. For these reasons, governments in nearly all the large consuming nations are now besieged by doubts about their energy security like at no time since the oil crises of the 1970s. Meanwhile, the biggest energy suppliers are questioning whether demand is certain enough to justify the big investments needed to develop new capacity. Producers and consumers, each group unsure of the other, cannot agree on how best to finance and manage a more secure energy system.

A crisis is looming, and it will be difficult to resolve because it will strike as two radically new changes are making it harder for governments to manage the world energy system. The first is a shift in the sources of consumption. The era of growing demand for oil and other fossil fuels in the industrialized countries is over; most of the future growth in demand will come from the emerging-market countries, notably China and India. The International Energy Agency (IEA) has projected that by 2030, China will depend on imports for at least two-thirds of its oil, and India, for even more. These countries, especially China, are choosing to secure their energy supplies less by relying on commercial interests -- the standard approach for all the biggest industrial energy users

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