Back to the future or forward to the past? Strengthening markets and rules for effective global energy governance

International Affairs

Volumn 85, Issue 2, 2009, Pages 373-390

  Goldthau, Andreas ^a,b   Witte, Jan Martin ^c  

^a CENTRAL EUROPEAN UNIVERSITY   (Hungary)

^b CEU's Center for Environment and Security

^c Global Public Policy Institute   (Switzerland)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 62349086262     PISSN: 00205850     EISSN: 14682346     Source Type: Journal    
DOI: 10.1111/j.1468-2346.2009.00798.x     Document Type: Article

References (48)

1. See International Energy Agency, World Energy Outlook 2008 (Paris, 2008), p. 78.
2. For a comprehensive analysis of these trends and their implications for existing governance structures in global energy, see Andreas Goldthau and Jan Martin Witte, eds, Changing rules of the game: global energy governance in the 21st century (Washington DC: Brookings, 2009 forthcoming).
3. As it turned out, however, the years following the 1973 embargo saw an easing of oil market conditions, primarily as a result of the global economic downturn, which depressed demand for oil. In addition, the price hike initiated by OPEC also triggered powerful conservation and technology-switching efforts in consumer countries that progressively took hold and reduced the energy intensity of consuming economies. 4 See also Leonardo Maugeri, The age of oil (Guilford, CT: Lyons, 2006), p. 116.
4. See, e.g., Robert Biolsi, 'Spot, options, and futures oil markets', in Siamack Shojai, ed., The new global oil market: understanding energy issues in the world economy (Westport, CT: Greenwood, 1995).
5. Price competition is primarily a result of the fact that, in a liberalized market, new oil producers find it easier to sell through spot markets because long-term contracts are often out of reach in the absence of a significant, long-term production record.
6. Moreover, excluding volumes from trading does not necessarily mean they cost less-that depends first and foremost on the contract in question.
7. It is important to note that some OPEC producers tend to sell oil under contracts entailing destination clauses which limit further resale by the buyer. Hence the most successful spot markets are located in the United States and Europe.
8. Pierre Noel, 'The future world oil market: state of nature or social contract?', comments on article by M. A. Tétreault, Institute for Energy Economics and Policy, University of Grenoble, n.d., p. 3. Accessible at http:// web.upmf-grenoble.fr/iepe/textes/pn9912.pdf, accessed 17 June 2008, p. 5.
9. See also Daniel Yergin, 'Energy security and markets', in Jan H. Kalicki and David L. Goldwyn, eds, Energy and security: toward a new foreign policy strategy (Washington DC: Woodrow Wilson Center, 2004).
10. See IEA, World Energy Outlook 2008, p. 119.
11. Douglass North, Institutions, institutional change, and economic performance (New York: Cambridge University Press, 1990).
12. Richard Nelson and Bhaven Sampat, 'Making sense of institutions as a factor shaping economic performance', Journal of Economic Behavior and Organization 44: 1, 2001, pp. 31-54.
13. It is important to note that supply disruptions do not necessarily occur only as a result of market failure. As the cases of Hurricane Katrina or the first Gulf war reveal, natural disasters or political events may also disrupt supplies and require a release of strategic stocks to stabilize prices. Yet while these events can be regarded as wild cards exogenous to the market, the emphasis of our argument lies on the market structures as such and on the governance mechanism that characterizes them.
14. See IEA, Oil supply: emergency response of IEA countries (Paris, 2007).
15. For a discussion of the speculative character of hedging contracts in energy see, e.g., Commodity Futures Trading Commission, 'Trends in energy derivatives markets raise questions about CFTC's oversight', Government Accountability Office report 08-25 (Washington DC: GAO, Oct. 2007).
16. For a discussion, see John V. Mitchell, Producer-consumer dialogue: what can energy ministers say to each other? (London: Chatham House, 2005).
17. For an overview see, e.g., Andrea Jiménez-Guerra, The World Trade Organization (Oxford: Oxford Institute of Energy Studies, 2001);
18. see also Thomas Waelde and Alexander Gunst, 'International energy trade and access to energy networks', Journal of World Trade 36: 2, 2002, pp. 191-218.
19. See, e.g., the contributions in Thomas Waelde, ed. The Energy Charter Treaty: an East-West gateway for investment and trade (London, The Hague and Boston: Kluwer Law International, 1996).
20. It is important to note that while the predominant focus regarding consumption is on emerging economies, additional trends need to be accounted for as well. In particular, the growth in energy consumption in oilexporting countries, mainly encouraged by subsidies, might constrain their export capacities and even make some of these countries net oil importers in years to come (see John V. Mitchell and John Stevens, Ending dependence: hard choices for oil-exporting states (London: Chatham House, 2008). In addition, while two-thirds of the projected global consumption increment up to 2030 will be caused by emerging economies, the remaining third still remains with importing industrialized economies, i.e. the OECD world.
21. See IEA, World Energy Outlook 2008.
22. See http://ihsindexes.com/ucci-graph.htm, accessed 20 June 2008.
23. IEA, World Energy Outlook 2008, p. 77.
24. IEA, World Energy Outlook 2008, p. 89.
25. See Oil and Gas Journal 105: 35, 17 Sept. 2007, p. 20.
26. On China and Japan see, e.g., Erica Strecker Downs, China's quest for energy security (Washington DC: RAND, 2005)
27. and Peter Evans, Japan: bracing for an uncertain energy future (Washington DC: Brookings, 2006).
28. Most notably, prominent Central European politicians have repeatedly called for an 'Energy NATO' to secure future supplies. For a geopolitical perspective on energy, see also, e.g., Michael T. Klare, Rising powers, shrinking planet: the new geopolitics of energy (New York: Metropolitan, 2008).
29. See Eurasia Group, China's overseas investments in oil and gas production (New York: US-China Economic and Security Review Commission, 2006), p. 3
30. and US Department of Energy, Energy Policy Act 2005, s. 1837, 'National security review of international energy requirements' (Washington DC: DoE, 2006), p. 28.
31. For an overview of Chinese foreign assets, see also KPMG, Energy outlook for China (Hong Kong: KPMG, 2005)
32. and Downs, China's quest for energy security.
33. See Nicholas Stern, The economics of climate change: the Stern Review (Cambridge: Cambridge University Press, 2007).
34. See, e.g., Will Blyth and Rory Sullivan, 'Climate change policy uncertainty and the electricity industry: implications and unintended consequences', briefing paper (London: Chatham House, Aug. 2006).
35. Contrary to conventional perception, a strong role of NOCs in global energy does not necessarily imply 'less market'. In fact, producer NOCs supply the same global market as their private counterparts while major consumer NOCs, such as Chinese oil companies, tend to sell significant volumes of their equity oil on global markets rather than shipping it back home. See IEA, World Energy Outlook 2007 (Paris, 2007), p. 179.
36. See also the Baker Institute's seminal study on NOCs, available at http://www.rice.edu/energy/publications/ nocs.html, accessed 31 July 2008.
37. On the recent shift in China's energy policy, see also International Crisis Group, China's thirst for oil, Asia Report 153 (Seoul/Brussels, 2008).
38. See the IEA's country analysis briefs on Saudi Arabia, Kuwait and Venezuela, available at http://www.eia.doe. gov/emeu/cabs/, accessed 31 July 2008.
39. See, e.g., statement by Guy Caruso, administrator of the US Department of Energy's Energy Information Agency, cited in 'Energy watchdog warns of oil-production crunch', Wall Street Journal, 22 May 2008.
40. IEA, World Energy Outlook 2008, p. 89.
41. BP, Statistical review of world energy (London: British Petroleum, 2008).
42. However, GATT rules also apply to export restrictions. Thus the OPEC production quotas can be interpreted as a quantitative restriction to trade that runs contrary to GATT/WTO rules (article XI). The exporting countries could probably obtain an exception for those rules by arguing that they are attempting to conserve natural resources (a legitimate exception under GATT/ WTO rules, laid down in article XX). However, were they to discriminate between export destinations, that practice would be a violation of GATT/WTO rules. See also Melaku Geboye Desta, 'OPEC, the WTO and regional trade agreements', Journal of World Trade 32: 3, pp. 523-51. Note also that various members of the US Congress have in recent years put forward legislative initiatives to force the US administration to pursue OPEC members in the WTO. One bill, the OPEC Accountability Act of 2008, was co-sponsored by Senators Carl Levin (D-MI), Byron Dorgan (D-ND), Bob Casey (D-PA) and Bernie Sanders (I-VT). See http://www.govtrack.us/congress/billtext.xpd?bill=s110-2964, accessed 26 Jan. 2009.
43. See also the Baker Institute's studies on NOCs, available at http://www.rice.edu/energy/publications/nocs. html, accessed 31 July 2008 and 'Nationals' champion: how the energy-rich rely on Schlumberger', Financial Times, 29 July 2008.
44. See Edward Cunningham, China's energy governance: perception and reality (Cambridge, MA: MIT Center for International Studies, 2007).
45. On the EU's biofuels policy, see http://www.euractiv.com/en/energy/eu- renewable-energy-policy/article117536, accessed 10 Sept. 2008;
46. on the United States, see the press release on http://agriculture.senate. gov/news2/record.cfm?id=279763, accessed 10 Sept. 2008 and on China, see Kevin Latner, Caleb O'Kray and Junyang Jiang, Strict government control characterizes Chinese biofuel development (Washington DC: United States Department of Agriculture, Foreign Agricultural Service, 2006).
47. See, e.g., International Food and Agricultural Trade Policy Council, 'WTO disciplines and biofuels: opportunities and constraints in the creation of a global marketplace', IPC discussion paper, Oct. 2006.
48. Joseph A. Stanislaw, 'Energy competition or cooperation: shifting the paradigm', Economic Perspectives 9: 2, May 2004, pp. 17-20.