How we define energy security

ARTICLE: “Oil-fired socialism,” by Richard Lapper, Financial Times, 24 January 2007, p. 5.

ARTICLE: “With Marx, Lenin and Jesus Christ: Hugo Chavez’s ’21-st century socialism’ starts to look even more like old-fashioned autocracy,” The Economist, 13 January 2007, p. 33.

ARTICLE: “Over a Barrel: the Global Scramble for Energy Security,” by Chip Cummins, Bhushan Bahree and Patricia Minczeski, Wall Street Journal, 25 January 2007, p. A12.

OP-ED: “‘Energy Independence,’” by Daniel Yergin, Wall Street Journal, 23 January 2007, p. A19.

ARTICLE: “Lukoil extends its reach across Europe: The private company has kept a low profiled as it pushes into the south-east,” by Stefan Wagstyl and Isabel Gorst, Financial Times, 24 January 2007, p. 3.

ARTICLE: “Merkel Energizes Western Links to Russia,” by Marcus Walker, Wall Street Journal, 22 January 2007, p. A3.

Chavez is certainly enjoying his run. With his latest electoral plundering, he’s pushing Venezuela further down the path of state control over the economy and an extreme concentration of political power in his hands.

Different in degree or kind from Putin? Plenty harsher in degree and the ambition is wholly different in kind. Russia wants downstream connectivity and economic power, but Chavez simply wants his pie whole, no matter how much smaller he makes it in the process. Putin wants the commanding heights for the government, but Chavez wants every moneymaking industry out there. Russia will sink into single-party statehood, but as a development strategy as much as a power grab. Chavez has no plans for development, just aggregation to the state. Putin will leave office (the key aspect to growth, as studies show, the rotation of leadership is everything), but Chavez is set to rule for life.

Chavez has his imitators and allies in Bolivia and now Ecuador, but no, don’t count Ortega truly in that camp. He’s in it strictly for the bucks this time.

And check out the 11 elections in the region over the past 14 months, because moderates took 7, including five moderates returned to power in the biggest states (Brazil, Mexico, Peru, Columbia and Chile).

Chavez is eating his seed corn and devouring it fast. He’s living on high oil prices, which fuel 85% of his export revenues and half of his country’s income.

But no, he’s not creating any new socialism. It’s the same old, same old for this latest “big man” to rule in South America.

His run may well be long, because the key driver now is the East’s rising thirst for oil. U.S. needs go up 17% since 1995, Europe’s only 5.6% and Japan’s down 7.3%. But India’s up 57% and China 106%, and neither will slow any year soon.

Of course, our current troubles in the Middle East drive many for that “Calgon--take me away!” strategy of wanting to rid ourselves of dependence on foreign energy, but why we’d go for autarky in that one realm while submitting to globalization’s embrace in every other one--including defense, whether we like it or not--is beyond me.

Yergin’s op-ed does the subject up nicely: oil is about 40% of our energy, and we import only 60% of that, so our oil exposure is about one-quarter of our energy risk. Of that risk, only 19% comes from the Middle East, bringing our real oil exposure down to less than 5%. Slash that down to zero and what have we done? We’ve just made it easier for China and India to pick up some extra barrels, but we hardly reduce their dependence, and last time I checked we’re awfully intertwined with China already.

Plus, as Yergin points out to the surprise of no one familiar with markets, “There is a ‘great bubbling’ all along the innovation frontier of energy.” But even that “liberation” will be mostly about diversifying our sources of energy, not reducing our overall draw on the world per se. We’ll move down the hydrocarbon chain, for sure, but our dependence on the world at large is unlikely to be much diminished.

But in the end, all that says is that we have to fix that world and that we have to live with “these people.” Resilience cannot be hoarded. It’s not a zero-sum game. The more you get, the more I get, and vice versa. So the more we figure out how to draw energy producers both down and upstream to our economies, the more our shared future becomes transparent.

Merkel gets that on Russia. Bush, by and large, got that on the Middle East (no matter how he scares us with threatening to “enlarge the problem” beyond anyone’s capacity for solution). We’ll all be forced to continue getting it on the Gap in general.

There is no independence in the classic sense once you embrace globalization. And if you choose isolation, then there will be only the slow decay that grows more rapid with time (what we watch in all such disconnected states, no matter their brave fronts and their fiery rhetoric).

All this talk about power shifting to oil producers is overblown. They are a scenario to be discounted--financially, politically, militarily, technologically. That much is true. But that’s no real power, because these states are far more dependent on our consumption than vice versa.