Energy Security : Perspectives, Problems and Prospects

Oil is the most valuable and desirable asset in the world today. Almost one third of India’s energy supply is produced from oil. It is well accepted and un-debatable that it is the heart of the India as well as world economy. But the gap between India’s oil demand and supply is widening temporally, as demand reached nearly 4 million barrels per day (bbl/d) in 2013 compared to less than 1 million bbl/d of total oil production. India was the sixth-largest LNG importer in 2011 and accounted for nearly 5.3 per cent of global imports. India’s LNG imports are forecast to increase at a CAGR of 33 per cent during 2012–17. This discrepancy in the rising demand and stagnant supply implies that India should achieve energy security as soon as possible.

The term energy security is defined as the ” the ability to optimize its energy resources to achieve the desired level of services in long term”. In the past, energy security was viewed as the reliable and affordable access to the oil. As time passed away, geopolitical intervention resulted with new views over energy security. Apart from it, the major global events signify that each country have the immediate need to attain the energy security such as Suez Crisis (1956), the First ‘Oil shock’ (1973), the Second ‘Oil shock’ (1973), Gulf war (1990-1991) and recent Iraq Oil crisis (2014) etc. The distribution of world reserves is a clumped distribution, which means few group of countries have almost all the reserves. There is great mismatch between the consuming and producing nations. This has resulted in the birth of intergovernmental organization named as “Organization of the Petroleum Exporting Countries” (OPEC).

There are two approaches to create energy security in any country, either “Below the Ground” or “Above the Ground“. The “Below the Ground” approach means technological up-gradation which should be sustainable cost and time efficient process. On the other hand, “Above the Ground” approach means the continuous reform in the fiscal and monetary policies of any country. There are two major problems in policy making: firstly the policy making is without any specific goal which has many times led to deviation from the genuine problem worthy of government attention. Secondly, fixing of one problem can exacerbate others. Most often, the decision are never proceceded further without political intervention. In general, there should be three goals of energy policy: energy should be cheap, clean and secure. First goal of cheap energy can be achieved by both below and above the ground. In order to encourage the economic growth the petroleum products are subsidized to restrain the inflation. But policies should be formed in such a way that it make energy truly cheap, not just appear cheaper (in context of subsidy). It is somehow difficult to achieve through the “Above the Ground” route because involvement of political issues.

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In developing countries such as India and China, clean energy is a luxury which is far from there reaches due to affordability. There might be a possibility that the price of dirty and insecure fuel will rise significantly. As income rises, environmental concern will increase leading to increase in demand of cleaner fuel. If we consider any fuel such as petroleum, coal, natural gas, nuclear etc, none of them consist of all the three goals together. It is suggested that collective energizing team effort of all the countries should be implemented in Research and Development (R & D) sector. This has the immense potential to address all the energy goals together.

Till now, it is well evident that it is difficult to address the energy security by “Below the Ground” approach by taking current scenario in consideration. There are few suggestions to tackle the energy security issue (in context of India) by adopting “Above the Ground” approaches are as follows:

  • Many countries such as Malaysia, Canada, Ghana, Mexico, China, Brazil etc. already have been running over the path of achieving the energy security by different policies reform in the oil and gas sector. We can adopt the appropriate policies from them .
  • To adopt market based pricing, which will attract the private players leading to huge reduction in under recoveries and subsidies. There should be a stabilization fund to tackle any violent fluctuation in the market.
  • Large proportion of India’s total population is below poverty line. It is suggested that subsidies should be in quantified amount and to identifiable section of society only.
  • Increase the bilateral agreement in order to ensure the future oil supplies.
  • 100 % Foreign Direct Investment in oil and gas value chain.
  • Adopt the single window clearance for investors.

To conclude, by ushering in important economic reforms and by putting appropriate policies in place to revive foreign and domestic investment, India can realize a higher economic growth rate, which is important for the country to raise its social, political and economic standards. But the issue of energy security should be addressed globally by collective effort of all the countries. Furthermore, it is clearly evident that the policies of  development and reformation should be done by considering market and globalization as allies, rather than enemies. This is the best possible way to address the world energy security.

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Energy Security : Perspectives, Problems and Prospects

by Yash Maurya time to read: 4 min
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