Monday, April 03, 2006


Energy security - in case the G8 fails

Increasing the security against global energy disruptions involves more countries than the G8. The Institute for International Economics recommend (number 4 below) increasing the membership of the OECD's International Energy Agency. But in case the G8 cannot solve this matter, the United States is exploring setting up an insurance grouping of interested parties:

The "Energy Diplomacy and Security Act" [draft legislation] proposes that the United States, the world's largest oil consumer, forge energy partnerships abroad, notably with China and India, the world's second and fifth largest oil consumers, respectively.

Specifically, the legislation calls for China, India, and the United States to coordinate the release of strategic oil stocks, currently under construction in China and under discussion in India, to manage supply disruptions. Unlike the United States, neither China nor India are members of the International Energy Agency (IEA), the institution established to foster cooperation among the world's major oil consumers. The centerpiece of the IEA is the maintenance of emergency oil stocks and plans for coordinated use. In the near future, China and India are unlikely to join the IEA, which requires membership in the Organization for Economic Cooperation and Development and the maintenance of emergency oil stocks equivalent to at least 90 days of net oil imports. A formal coordination agreement with the United States would reinforce the informal cooperation that already exists between the IEA and China and India. Such an agreement, as outlined in Sen. Lugar's bill, would encourage both countries to contribute to global energy security through participation in international emergency oil stock releases to manage oil supply disruptions and their consequences.

Update - FT on 20 April 2006

The world should get ready for a Nato-style oil alliance
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