World Energy Outlook 2007

CHAPTER 4
THE WORLD’S ENERGY SECURITY
HIGHLIGHTS
Rising global energy demand, to which China and India contribute, has
important implications for the world’s energy security. The reliance of all
consuming countries on oil and gas imports will grow markedly in the
absence of new policies in major countries to curb demand. Ensuring
reliable and affordable supply will be a formidable challenge.
Increased trade could bring mutual economic benefits to all concerned, but
it carries heightened risks, for consuming countries generally, of short-term
supply interruptions, as geographic supply diversity is reduced and reliance
grows on a few supply routes. Much of the additional oil imports required
by China, India and other countries will come from the Middle East, the
scene of most past supply disruptions, and will transit vulnerable maritime
routes to both eastern and western markets. Supply disruptions drive up
prices to all consuming countries, regardless of where they obtain their oil.
The increasing concentration of the world’s remaining oil reserves in a
small group of countries – notably a few Middle Eastern producers and
Russia – will increase their market dominance and their ability to impose
higher prices in the longer term. Their share of gas supply is also likely to
rise. In the Reference Scenario, almost three-quarters of the growth in
world oil production and 43% of gas production come from the Middle
East and Russia.
With stronger global energy demand, all regions would be faced with
higher energy prices in the medium to long term in the absence of
concomitant increases in supply-side investment or stronger policy action
to curb demand growth in consuming countries. The faster the increase in
the call on oil and gas from the leading exporters, the more likely it will be
that they will seek to extract a higher rent from their exports in the future.
China’s and India’s growing participation in international trade amplifies
the importance of their contribution to collective efforts to enhance global
energy security. The more effective are their policies to avoid or handle a
supply emergency, the more other consuming countries stand to benefit.
Equally, efforts by other consuming countries bring important benefits to
China and India. Most energy-security policies also bring environmental
benefits.
Chapter 4 - The World’s Energy Security 159