Our Best New Foreign Policy Tool: Energy

By Alexanser Mirtchev

To date, the extensive policy debate over production of non-traditional fossil fuels, such as shale gas, and the resulting possibility for the use of those resources by the United States  has not adequately focused on an important consideration: the geo-economic and foreign policy implications and advantages to the United States, its allies, and global economic security overall, stemming from these new fossil fuel resources.

New gas resources and exports of liquefied natural gas (LNG) from the U.S. are an added economic resource, which can allow the U.S. to mitigate its own and the reliance of many of its allies in Europe on external sources of fossil fuels. Europe is extensively dependent on gas imports, especially from Russia, as well as  Algeria, Qatar and others. According to the International Energy Agency, Europe depended on oil and gas imports for over 60% of its demand in 2010, and this dependence is set to increase to over 80% by 2035. At the same time, the external energy suppliers to the EU have demonstrated their willingness to use the leverage of European energy dependence for foreign policy purposes. Several times in recent history, Russian disputes with countries through which those pipelines transit – most notably disputes with the Ukraine in 2006 and 2009 – have caused either actual supply shortages or fear of supply shortages to Europe, which was sufficient to roil the local markets. The simple knowledge that Europe depends on foreign gas has allowed exporters to use producer power as a foreign policy leverage.

The preferred manner of transporting gas to European markets has been pipelines, but currently only one meaningful alternative pipeline route is being developed – from Azerbaijan to Europe – to provide a check on Russian natural gas power. This raises the importance of LNG, the other alternative form of supplying distant markets. Because LNG is transported in vessels, supply is not limited by pipeline infrastructure but instead can be delivered to various markets so long as LNG regasification facilities exist. European countries such as Belgium, France, Italy, the Netherlands, Portugal, and Spain currently import LNG. Additional LNG regasification facilities and increased supplies of LNG on the world market will increase European energy security. This is where the U.S. is in position to become an adequate optional source of energy and energy security for its European allies.

With huge supplies of natural gas and the technical capability to produce large quantities of gas on a steady basis for years to come, the introduction of meaningful volumes of U.S. LNG into world markets will disrupt the current market, threaten the incumbents and ultimately lead to the creation of a liquid global spot market for LNG. It will not require duplicative infrastructure, only sufficient adjustments and adaptation to ensure that loss of other suppliers will not constrain consumers. Once European buyers are able to tap into liquid global markets rather than long-term contracts with one or two suppliers, they will be less intimidated by prospects of shutdown or other forms of manipulation of gas deliveries. The mere availability of adequate LNG regasification infrastructure and supply may be all that is necessary to prevent gas exporters from using natural gas supply as geopolitical leverage, nudge them to take diversification seriously and spur a wave of market reforms, contributing to the improvement of global economic security.

The geopolitical opportunities presented by the shale revolution and the prospect of LNG exports cannot be underestimated, and yet these considerations seem to rarely factor into the current debate in the US about LNG exports. The economic rationale for increased LNG exports from the US have been well documented. A recent IHS study puts the increase in US industrial production at $252 billion by 2020, thanks to lower energy prices in the US and other economic ‘spillovers’ from unconventional oil and gas. The objections fall into two categories: (i) those large US industrial consumers that benefit from low natural gas prices and thus for parochial reasons want to limit demand by closing off export markets in order to keep an imbalance between supply and demand that results in artificially low prices; and (ii) environmental interests opposed to hydraulic fracturing used to produce much US natural gas and who therefore want to close off export markets in order to try to limit natural gas production. While the economic case alone outweighs these objections, the case for US LNG exports becomes even stronger when one further takes into account how US LNG exports stand to advance US foreign policy, geo-economic and geopolitical interests.

Dr. Mirtchev is an economist who frequently writes on global economic security and energy issues

Will Financial Regulation Trash Global Economic Securi

Alexander Mirtchev, Contributor

Under the auspices of the Financial Stability Board, more than 30 recommendations have been set out as part of a massive and far-reaching G-20 financial regulatory reform package to ostensibly minimize risk in the financial system and maximize consumer protection.

How the Alternative Energy Megatrend will impact global geopolitical relations

The Greening of Geopolitics

By Dr Alexander Mirtchev

 

The advent of renewable energies is generally regarded from a fairly narrow perspective: whether – and to what extent – they are able to replace fossil fuels and what this would mean for the energy system and the economy. Such a perspective profoundly underestimates the potential consequences of what is in fact a revolutionary global development: a socio-political and techno-economic megatrend that has the ability to become a global societal game-changer, writes Alexander Mirtchev, Vice-President of the Royal United Services Institute for Defence and Security Studies (RUSI). According to Mirtchev, the ‘Alternative Energy Megatrend’ will have far-reaching effects on global geopolitical relations and security concerns – effects that have yet to be fully grasped by most observers. This article is adapted from his upcoming book: “The Alternative Energy Megatrend: A Global Security Discourse in the Universally-Securitized World”.

Alternative Energy And Global Energy Security In Aftermath Of Rio+20

“Life always gets harder toward the summit–the cold increases, the responsibility increases.” These words by Friedrich Nietzsche aptly characterize the atmosphere among global leaders at June’s international summits.

Gas and electricity bills hide internet savings

New energy statements are failing to make clear that some customers could save hundreds of pounds on fuel bills.

The statements, which will be delivered to every UK home by the end of the year, will explain discounts available on a customer's current tariff.

But they will fail to detail the savings that can be made by switching to an internet-based plan.

Figures show a difference of £239 between an online tariff and paying by cheque when a bill arrives.
Statements

Suppliers have been told by the regulator Ofgem to start sending out annual statements. They are intended to help consumers understand their energy use and what it is costing them.

They should include information such as the name of a customer's tariff and a reminder that the customer can switch provider, along with advice on how to do so.

They must also point out any discounts that apply to the tariff the customer is on when compared with the same supplier's standard direct debit tariff.

But they will not show cheaper deals available for online tariffs. These are internet-based deals that use e-mails instead of paper bills and require customers to enter meter readings online.

At present an estimated 13% of UK households are on an online energy plan.

The regulator has not demanded these cheaper deals be flagged up, because it says direct debit - not an online plan - is "the cheapest payment accessible to the majority of customers".

The reason, according to an Ofgem spokesman, is that these deals are often time-limited or have other conditions - in other words, that they are a moveable feast.

Debate

This has had some support from watchdog Consumer Focus, which said it could prove difficult to put an accurate price of the cheapest deals on annual statements.

And the energy suppliers say the statements will make consumers better equipped in any case.

"The best way to ensure you are on the best deal from your supplier is to talk to them direct - there is no one-size-fits-all solution. But it is also important to shop around to see if other companies might offer a deal that suits you better," said a spokesman for Energy UK, which represents the major energy companies.

"Annual statements provide useful information on cost and energy usage, making it easier for customers to make comparisons with offers available from both their existing supplier and other companies."

But the argument does not seem to have convinced the Department of Energy and Climate Change (DECC). In line with the coalition agreement, it is planning a change in the law next year to force suppliers to include details of the cheapest deal on the statement.

This move, according to Ann Robinson, of price comparison website Uswitch, is leading to a narrowing of the gap between the annual cost to those paying when they receive a paper bill and those on an online tariff.

"The proposal that suppliers will have to show their cheapest tariffs on all household bills could be causing them to re-think their pricing strategy," she said.

"At the moment just over one in 10 of us are on a competitive online energy plan. If suppliers bring it to the attention of all their customers, this number could rocket. Clearly suppliers are concerned about the impact it could have on their bottom line and so may be looking to see how this pans out.

"The important thing is that consumers understand that these plans continue to be highly competitive and along with fixed price plans offer an easy way to protect yourself from the impact of winter price hikes."

Uswitch calculated figures for the BBC showing the difference between the average standard plans (payment on receipt) and the average online price among suppliers in the UK for dual-fuel gas and electricity bills.

This stood at £143 a year in November 2007, and widened to £179 a year later, and to £265 by November 2009.

However, the difference narrowed again to £239 by November this year. The typical online price was £956 compared with £1,195 for the average standard bill.

By Kevin Peachey Personal finance reporter, BBC News