注册 登录  
 加关注
   显示下一条  |  关闭
温馨提示!由于新浪微博认证机制调整,您的新浪微博帐号绑定已过期,请重新绑定!立即重新绑定新浪微博》  |  关闭

管清友

晴耕雨读

 
 
 

日志

 
 

happy new year  

2008-01-01 00:58:05|  分类: 理论 |  标签: |举报 |字号 订阅

  下载LOFTER 我的照片书  |

World Energy Landscape and China’s Energy Security

Suggested headline:

Oil Price Fluctuation Reflects Power Balance in International Relations

The World Energy Landscape Changes with Powers of Interest

Energy Security Issue Is Viewed from International Political Economy

Options Analyzed for China to Maintain Energy Security

In Maintaining Energy Security, China Is Not Challenging Existing Energy Interest Distribution Pattern

 

 

World Energy Landscape and China’s Energy Security

 

ZHANG Yuyan1 (张宇燕) and GUAN Qingyou2 (管清友)*

1 Institute of Asia-Pacific Studies at the Chinese Academy of Social Sciences

2 Centre for China Study at Tsinghua University

 

I. Statement of Issue and Review of Literature

 

Every time a problem is reposed it can be seen in a different light, and therefore there exists a myriad of answers to the same problem. This difficulty has long plagued economists attempting to solve ongoing economic problems. Paul Krugman (2000) pessimistically stated that major problems in the economy will never be resolved but instead will slowly disappear. The world energy market and its price trends are no doubt one of the most prominent “major problems”.  

 

In the world today, energy has become a currency of political and economic power, and is a determining factor in the international power ranking system and even a new yardstick measuring success and material progress. Acquiring or maintaining energy supply has become an overriding mission in the 21st century. Energy matters are of utmost concern in the world and especially to China. Kenneth Lieberthal & William Davidson (2006) noted that “Energy security is no longer a domestic economic policy issue of low political relevance, but has become a high political issue directly related to China’s national security”.   

 

Oil is the core of all energy. As P. Roberts (2004) visually described, “Oil is perhaps the most shining star in the energy universe. It is a magnificent and outstanding model of politics and economics in the 20th century, occupying an approximate 40% share of the world energy market”. J.S. Nye also regarded oil as the “source of power”. Therefore, oil market price fluctuations greatly influence the world economy, international relations and also have a direct bearing on China’s energy security. 

 

The earliest study by economists on the causes and forecast of oil price fluctuation can be traced to the exhaustible resource model advanced by Hotelling (1931), also called Hotelling’s Rule. This rule reveals the relationship of exhaustible resource price to output under the two conditions of perfect competition and monopoly[1]. Using Hotelling’s concepts as a starting point, an array of theoretical models have appeared in subsequent literature setting out the different structures of the oil market and the different behaviours of oil market players to analyse the causes and trends of oil price fluctuation through the introduction of relevant parameters. Based on their respective areas of study, such literature can be divided into two types: the market structure model and the OPEC behaviour model. The market structural model can be further divided into the competitive market structure model and the monopoly market structure model. The competitive market structure model emphasizes the competitiveness of the world oil market and oil price beyond the control of OPEC. The monopoly market structure model focuses on the study of the influence that OPEC and its member countries have on the oil market. It takes OPEC as a cartel organization and regards the international oil market as a monopoly market whose price is set by the cartel. International oil price fluctuations depend on OPEC countries’ pricing rules. 

 

In the opinion of A. Crow, however, “no theoretical model can withstand the test of facts though theoretical economists appear unaware of or concerned with this”. “The geopolitical distribution of oil resources makes us unable to believe in the conditions determining the equilibrium of the oil market supply and demand or to know whether the corresponding selection factors in the oil trade are pure market mechanisms or reasonable economic parameters. In the future, economic models or theories will not be able to provide us with as much help as in the past”. A literature review reveals that economists still haven’t been able to create a perfect analytical framework for the oil market. Oil price related problems bear striking similarities from year to year, but at the same time explanations for the causes of such problems vary greatly. 

 

Therefore, we take a different stance and attempt to understand and explain the international oil market and the problems of oil price fluctuation from the new perspective of political economy and the broader perspective of international political economy. The question we are most concerned with is: how has the world energy landscape become what it is now? In which direction will it head for? How will international oil price evolve in the existing world energy landscape? How can China’s energy security be safeguarded?Based on a review of relevant literature, Part II of this article describes the status quo of the world energy landscape with an emphasis on changes in the world energy landscape and our predictions for future oil price trends; Part III introduces the meaning and our understanding of “energy security” as well as a brief summary of the fundamental problems facing China’s energy security; last but not least, we present our conclusions. 

 

II. The Status Quo and Future of the World Energy Landscape

 

Oil price instability originates from market fluctuation and at a deeper level from changes in the world energy landscape. “In fact, uncertainty is a core element of the entire oil history and oil economy. The strategy of oil companies has always been to reduce such uncertainty whether they are tackling international organizational issues, designing their relationship with the market, or establishing a new contract mechanism,” said A. Crow. “As far as high uncertainty is concerned, the mutual independence of corporate decision results in a state of market imbalance and instability, with all uncertainties looming large, and non-cooperative, non-competitive behaviour prevailing.” “Instability is an inherent characteristic of oil supply”. In discussing the influence of such instability on national security, S. Strange said, “oil trade instability has, in a certain sense, broadened the national concept of insecurity; conversely, national reaction’s have increased certain risks of nuclear proliferation in the security structure and have thus worsened oil market instability.”

 

There are three main characteristics in today’s world landscape: 1) the formation of the power-led uniform world market and the resurgence of economic globalisation; 2) the United States is the strongest and most powerful large country, and no country has to date challenged the U.S. position. With factors such as the increasing power of Europe as a unified group and the rising of China, however, the U.S. position has been relatively in decline; 3) individual countries have their own strengths in certain specific areas, for example, Russia’s military strength, Middle-East countries’ oil resources, and China’s population size. Therefore, within the given world landscape, sub-landscape states may still arise due to changes in the relationship between countries and the amount of “power” each country has in different areas. The world energy landscape is a sub-landscape state resulting from the characteristics of the world landscape. It is comprised of the power structure balance of countries in the energy arena where stakeholders have reached a tentative concession with regard to energy production, exchange, consumption and allocation by way of competition, cooperation and negotiation etc. Any attempt to change the current state will not be worth the cost. Most oil producing countries are small countries in terms of comprehensive strength but “powerful” countries in the energy arena. Given the exhaustible nature of oil, the “power” of oil producing countries has become increasingly greater, and has become tied up in a stalemate and power equilibrium with big oil importing countries. 

 

The United States and OPEC play a pivotal role in the world energy landscape. “Oil has been the most important raw material in international trade for many years. The open and non-discriminatory currency and trade system sought by the United States is dependent on the growth and prosperity of other capitalist countries, which, in turn, are inevitably dependent on ready accessibility to Middle Eastern oil at a reasonable price” said Ou Jihan. “Oil is, in a material sense, at the centre of the U.S. hegemony redistribution system. The U.S. influence is built upon three major interest mechanisms under which U.S. allies gain profits and obey U.S. leadership. The three major interest mechanisms are: stable international currency system, open market and oil price stability.” The U.S. status in the world energy landscape is also reflected in the dollar denominated oil-pricing mechanism. As far as the United States is concerned, the importance of petrodollars in international oil trade lies not in the exchange rate (high or low) but in the monopolistic position of dollars as the trade medium since it reinforces the hegemonic position of US dollars

 

OPEC has to reach a compromise with the hegemonic power due to political, military and economic considerations in order to realize the so-called “interdependence”. At present, the major crude oil market suppliers are OPEC countries and some non-OPEC oil producing countries which deliver 40% of the world’s oil and own 70% of the world’s proven oil reserves. The role of OPEC as a terminal supplier is to function like a business consortium to influence oil price by maintaining adequate oil output. In recent years, its policy has shifted to allow oil consumer countries to maintain an appropriate level of crude inventory, whilst keeping the market in balance. In contrast, non-OPEC countries have limited reserves and excess capacity, and can only serve as passive price takers. Moreover, oil consumer countries are often passively and weakly positioned in the oil interest distribution landscape due to the heavy oil dependence of the world economy. However, the oil consumer countries represented by the United States are also strong military and economic groups who are advantageously positioned in the game with oil producing countries. In the short term, oil price and output are subject to certain fluctuations, but in the long term, the two blocks of countries are dependent on one another and equally matched in power. So, long-term oil price stability is indicative of an “equilibrium” state of interest distribution between the two major blocks and the temporary stability in the power structure between countries. 

 

In observation of the international oil price fluctuations in the 1860s, we found that oil price was stable in most years but significant fluctuations were experienced between 1861-1891 and 1970-1986 and drastic price hikes after 1999. According to the 1869-2004 oil price statistical data provided by West Texas Research Group, the average U.S. crude oil price starting in 1869 was US$18.59/barrel (adjusted for inflation), whereas the world’s average crude oil price was US $19.41/barrel in the same period. During one half of this timescale, the U.S. and world crude oil prices were below the median price of US$15.17/barrel. We also found that oil price was below the median price for most years prior to the formation of OPEC, suggesting that oil consumer countries were better positioned in interest distribution. Following the formation of OPEC, oil price stayed above the median price in most years, indicating that oil producing countries had gained an upper hand in interest allocation. Evidently, the dynamics of long-term oil price fluctuation are indicative of the ebb and flow of power between the two interest groups in the world energy landscape. 

 

In reality, the international crude oil market features a cyclic change between high oil price and low oil price. Historically, crude oil price was kept in the range of US$2.50/barrel~ US$3.00 /barrel from 1948 to the 1960s; crude oil price rose from US$2.50/barrel in 1948 to US$3.00 /barrel in 1957. Based on the USD price in 2004, the crude oil price fluctuated in the range of US$15/barrel-US$17/barrel at a level consistent with inflation; crude oil price stayed around US$3.00/barrel during the period 1958-1970, but with the deduction of the price factor it fell from US$16/barrel to below US$13/barrel. We also noted that international oil price fluctuated at a low price level for 12 years starting from 1986 in a so-called low oil price equilibrium cycle. This round of oil price escalation began from 1998, but experienced a period of hiatus from 2000-2001 and thereafter resumed price hikes. When looking at the history of oil price fluctuation, the following pattern or rule is evident: oil price denominated in USD (using real exchange rate) has never risen continuously for over 10 years, even in the two oil crises the nominal price increase lasted only 10 years. However, continuous oil price decline is likely to last 10 or more years (see Figure 1). Now the long-term cycle of high oil price may have arrived. 

 

Figure 1 1861-2006 Crude Oil Price Movement (US$)

0

20

40

60

80

100

120

1861

1868

1876

1883

1890

1897

1904

1911

1918

1925

1932

1939

1946

1953

1960

1967

1974

1981

1988

1995

2002

Nominal price

Real price

Figure 1 1861-2006 Crude Oil Price Movement (US$)

 

Note: 1861-1944 price is the U.S. average price; 1945-1983 price is Ras Tanura Arab light crude price; 1984-2006 price is Brent spot crude price. 

Source: BP Statistical Review of World Energy 2007. 

 

The world energy landscape has been at a critical turning point in recent years. Globally, the energy sector is undergoing a drastic change. Some countries have established oil exchanges in recent years, and have changed or are preparing to change the currency of oil trade settlement. As early as 1999, Iran announced its preparation to adopt a petroeuro pricing mechanism. Then in March 2006 Iran formally established a petroeuro oil trade and pricing exchange. Iran also put forward a proposition to Russia for the formation of a natural gas consortium similar to OPEC. Under the leadership of President Chavez, Venezuela used oil to establish a trace mechanism with 12 Latin American countries (including Cuba). Russia has also put on its agenda an initiative to establish an independent oil exchange. Russia currently occupies a vital position on the international oil and natural gas export markets, accounting for a market share of 15.2% and 25.8% respectively. It is probable that Russia will push for oil and natural gas trade settlement in rubles between CIS countries and expand it to oil trade with Asia and Europe before forming an oil alliance with such oil producing countries as Iran, Algeria, Venezuela and Mexico. The world energy landscape is now in the midst of a profound change, with a delicate shift of power between the two country blocks taking place. 

 

Our present judgment is that international oil price will still fluctuate around a high price level and experience a long cycle of high oil price. Oil is a special type of resource commodity. In retrospect of over 140 years of oil industry history, the real price of oil has not been in decline. Under the backdrop of global economic imbalance, the asset price inflation of each country and the price hikes of staple commodities such as oil on the international market are also a process of absorbing excess liquidity. At present, we are still in the cycle of oil price increase and are not in a position to ascertain the oil price predictions for the coming years. Assuming the absence of a significant decline in oil demand from each country or any mitigation of excess liquidity, oil price is likely to reach an all-time high during this cycle of escalation. 

 

III. Basic Issues concerning China’s Energy Security

 (I) Price Fluctuation Risk

(II) Availability Risk

 

Additionally, emission security has also become the new meaning of energy security as a result of ecological deterioration and faster climate change due to excess fossil fuel demand growth. According to the forecast of the IEA in “the 2007 World Energy Outlook: China and India Insights”, in the reference or base case scenario, from 2005-2030 global carbon dioxide emissions will rise 57%, two thirds of which will be attributable to the United States, China, Russia and India. China will account for the lion’s share of emissions increase. In 2007, China is likely to catch up with the United States to become the world’s largest emitter; in 2015, India will become the world’s third largest emitter. On a per capita basis, however, China and India’s average emission per head as of 2030 will still be way below that of the United States and OECD countries. The IEA forecast is consistent with the conclusion of a previous forecast made by the U.S. Energy Information Administration. China’s unit energy output and carbon dioxide emission per unit of GDP are above the world’s average level and way above those of OECD countries. In 2004, China became the world’s second largest carbon dioxide emitter, accounting for 17% of the world’s total carbon dioxide emissions (Figure 3). During the period 2003-2030, China’s carbon dioxide emission growth rate is 4.2%, the highest growth rate in the world. In 2030, China will be likely to account for 24.5% of the world’s total carbon dioxide emissions (Figure 4). Under the backdrop of the global response to climate change, China will be under increasing international pressure given its dual titles as the world’s second largest energy consumer and the world’s second biggest emitter of greenhouse gases. Emission insecurity poses a challenge not only to China’s energy security but also to China’s economic growth pattern, energy utilization mode and international energy policy.

 

 

carbon

Japan

U.S

前苏联

9%

美国

22%

日本

5%

欧洲

17%

中国

17%

煤炭

石油

天然气

其他

30%

 

Total of emissions

 China: 4.7billon K T

 The world: 27billon K T

other

China

Natural gas

oil

Europe

Russia

Source: EIA, International Energy Annual, http://www.eia.doe.gov/environment.html

 

Figure 4  China Carbon Dioxide Emission as a Percentage of the World’s Total

0%

5%

10%

15%

20%

25%

30%

2010年

2015年

2020年

2025年

2030年

Source: EIA, International Energy Annual, http://www.eia.doe.gov/environment.html

Concluding Remarks

 

Based on a summary and review of oil price fluctuations and the historical evolution of the world energy landscape, we conclude that oil price fluctuations are not only a result of the interaction between supplier and consumer in the international market but also a political arrangement between big powers on oil interest distribution. Oil price fluctuations reflect international market supply and demand balance on the one hand and the power structure of international relations on the other. History has proven that the world energy landscape is constantly in a process of change and evolution, which underlies the increasing oil price uncertainty in the long run. The world energy landscape evolution reflects the power balance between the two major groups. In S. Strange’s words, “energy is an absolutely indispensable condition for holding power in the international political economy, and it is impossible to acquire security and wealth without reliable energy supply”. 

 

China’s basic attitude towards energy security should be to seek a foothold in the existing world energy landscape and find out its own position therein without openly challenging or attempting to break up the existing energy interest distribution pattern. In respect of maintaining energy security, China can and must take action. 

 

Last, but not least, it is necessary to add that this article is a preliminary analysis of the energy sector from the perspective of the international political economy. The conclusions reached herein therefore require further justification. Our main goal has been to provide an analytical framework for the world energy landscape and offer recommendations for further areas of study.

 

Abstract: Due to the uncertainty of the oil economy, economists have yet to build a perfect analytical framework for the oil market. Over a period of time, oil price fluctuates according to the supply and demand of the international market. In the long run, however, given the political nature of oil, oil price fluctuation is also dependent on the power balance between oil consumer and producer countries. History has proven that the world energy landscape is constantly in a process of change and evolution, which underlies the increasing oil price uncertainty in the long run. From the perspective of the world energy landscape and its evolution, this article applies international political-economic methodology in addressing the energy security issues facing China, with the purpose of offering recommendations for further areas of energy research.

 

Key Words: World Energy Landscape; Uncertainty; Energy Cycle; Energy Security



This study is a sub-topic of the Ford Foundation Project- “China’s Relationship with the Outside World under the Backdrop of Globalisation” funded by the Ford Foundation of the United States, to which the authors acknowledge thanks. 

 

[1] H. Hotelling., The Economics of Exhaustible Resources, Journal of Political Economy, 39: 137-175,1931. This article was regarded by S. Devarajan and A. C. Fisher as the pioneer work of the resource economy, but Hotelling’s article and model failed to receive attention from scholars until 1974 when they were quoted by R.M. Solow. 

  评论这张
 
阅读(393)| 评论(3)
推荐 转载

历史上的今天

在LOFTER的更多文章

评论

<#--最新日志,群博日志--> <#--推荐日志--> <#--引用记录--> <#--博主推荐--> <#--随机阅读--> <#--首页推荐--> <#--历史上的今天--> <#--被推荐日志--> <#--上一篇,下一篇--> <#-- 热度 --> <#-- 网易新闻广告 --> <#--右边模块结构--> <#--评论模块结构--> <#--引用模块结构--> <#--博主发起的投票-->
 
 
 
 
 
 
 
 
 
 
 
 
 
 

页脚

网易公司版权所有 ©1997-2017