Global Energy Outlook: Importance And Challenges

1. Explain the importance and relevance of global energy outlook within contemporary organisations and evaluate the relationship between these organisation and countries.

2. Analyse the different energy policy frameworks in relation to the impact of the different elements of energy sources and sustainability.
3. Discuss the key global challenges and issues facing the world oil and gas industry and the factors affecting their long-term prospects. 

critically analyse examples of the two approaches, and how they can be operationalised to mitigate a potential blockade along the Strait of Hormuz. Describing the potential impact that a blockade of Strait of Hormuz will have and using specific examples will aid your arguments.

Global Energy Security and MENA Region

Global security of the energy exportation as well as energy transit from the Middle East and North Africa (herein after referred as MENA) region has been given the paramount importance for the growth of global economy (Brookings Doha Centre analysis paper, 2016). On account for, even if the wickedest-case scenarios have ignored, still the MENA region has a lengthy history of oil and gas supply disruptions as well as production and transportation. Out of which, transit from the Gulf and Strait of Hormuz (GASH) has acquired the most attention, while there are so many other susceptibilities, along with likely disruption scenarios from tiny-level local terrorism and interference to most important interstate conflicts (Global Maritime HUb, 2018). Therefore, the susceptibility of oil and gas transport has acquired the foremost attention, because of its magnitude, and the safety of liquid natural gas transfers and important importations to the Gulf and Strait of Hormuz are under-esteemed risks (Bahgat, 2008).

As the MENA is gifted with the bulk of the global oil reserve and is accountable for a huge share of world oil production, thus security of MENA oil supplies is a key issue for the oil security debates. These threats to energy security also happen for local production services as well as while transiting routes except the Persian Gulf and Strait of Hormuz. Moreover, MENA region has around fifty seven per cent of the globe’s proven oil reserves as well as forty one per cent of verified natural gas resources. It is also capable to provide unique solar resources worldwide. However, huge gap exists amid nations that are full of natural resources and countries that are dependent on others for these resources (The World Bank, 2010). In this context, several countries are having near to 100 per cent access to safe electricity; still an estimate tells that 28 million peoples are still having no access to electricity globally, particularly in the rural areas, besides around 8 million peoples are relying on outdated biomass energy techniques for all of their energy requirements (The World Bank, 2010).

Moreover, in order to highlight the problems and key challenges of various MENA countries (Bailey & Wellesley, 2017), the following issues are presented here:

• Cost recovery of electricity is quite low
• Petroleum product costs are biased
• Carbon intensity is higher than in technologically advanced countries
• The MENA region is lagging behind in employing improvements in the electricity sector as well as the in private sector investments
• The efforts for the renewable energy sources are under-explored (European Parliament, 2017)

In this way, population rise, sudden rapid urbanization and the economic growth are situating pressure on existing contemporary organisations as well as comparatively high demand for the novel investments (Harks, 2010). The continual high as well as volatile costs of fuels are pulling the finances of oil and gas importing countries, at the government as well as the utility level, besides growing costs of endowed energy at their premises for the oil exporters (Fattouh, 2008).

Energy transit chokepoints including sphere’s oil chokepoints for the maritime transit of oil are the critical elements for the world energy security. Because around half of the globe's oil production transports on the maritime routes. In this context, these chokepoints are the narrow channels along with extensively utilized world’s sea routes; out of them some are so narrow that limitations have been placed on the vessel size which can direct from them. These chokepoints are important parts of world energy security because of the bulk of oil traded by the narrow straits (Mansson et al., 2014). On the basis of volume of oil transportation, the Strait of Hormuz, is leading out of the Persian Gulf, as well as the Strait of Malacca, connecting the Pacific and Indian Oceans, are the two of the globe’s most tactical chokepoints. The international energy market (IEM) is relying upon reliable as well as disruption free transport. This is the reason that any blockage of these chokepoints, even provisionally, can result in considerable hikes in the whole energy pricing. Additionally, these chokepoints make oil tankers susceptible to theft from the pirates, shipping accidents, political unrest like wars or hostilities and terrorist attacks which can result in disastrous oil spilling. There are seven major straits include Panama canal, Danish straits, Turkish straits, Strait of Malacca, Bab el-Mandab, Suez Canal and Strait of Hormuz which are used mostly. They serve as the major trade routes for the world oil transportation, and disruptions to consignments (Mills , 2018).

Issues and Challenges Facing MENA Countries

In order to analyse the distinct energy policy frameworks related to the impacts of the various elements of energy resources as well as sustainability (Scarlet et al., 2015), we will discuss EU policy framework for renewable energy here. Firstly, in 1997, European Union policy (EU) on renewable energy has released as the White Paper for a Community Strategy and Action Plan Energy for the future: Renewable sources of energy. Following this EU policy there were so many policy frameworks have been released and executed. For an example Renewable Electricity Directive 2001/77/EC in 2001, the Biofuels Directive 2003/30/EC in 2003 and in 2007, the European Commission offered an integrated Energy and Climate Change policy frameworks for ensuring future energy sustainability. Finally, in 2009 Renewable Energy Directive (RED) 2009/28/EC has been proposed for the promotion of renewable energy resources, in order to hike the renewable energy share to at least 20 per cent of total energy consumption and 10 per cent renewable energy during transport by the era 2020 (Scarlet et al., 2015). Moreover, Energy 2020 - A strategy for competitive, sustainable and secure energy (COM (2010) 639) released out the European Commissions’ energy strategy for the period of 2020. This new energy strategy is focusing on 5 priorities: creating a united energy market; accomplishing an energy efficient Europe; attaining safety as well as security; outspreading leadership in energy technology as well as innovation; and firming up the external dimension (Harks, 2010).

The Strait of Hormuz is strategically important because it links the Persian Gulf with the Arabian Sea as well as the Gulf of Oman (Oil Price, 2012). Besides, it is a geographic chokepoint as well as a major artery for the oil and gas transport from the Middle East. Thus there will be so many potential impacts of the blockade of Strait of Hormuz. Even threats as well as the modest disruption to profitmaking shipping could cause economic destruction like crude oil supply issues, higher marine insurance rates, and fluctuating stock markets (The Conversation, 2018). For an example Rouhani’s threat of blockade of Strait of Hormuz will cause countless Americans and global peoples to suffer with energy crisis (Mills , 2018). Due to the lack of alternative routes, vulnerability of oil transportation using the Gulf and Strait of Hormuz is receiving the foremost attention. Diverse measures can be adopted to advance local energy security. These efforts can comprise the simulation of energy crises; improved and opportune info; communal funding of newly made infrastructure; tactical stock-holding in trade in countries; as well as cooperative sharing responses to oil disruptions. The efforts should also focus on gas and the other critical supplies of energy.

The two approaches for mitigating a potential blockade along the Strait of Hormuz include:

• Firstly, through cooperative sharing, and other groups of states, strengthening institutions as well as mechanisms for dealing with energy supply disruptions should be created (Harks, 2010).
• Secondly, constructing or upgrading infrastructure for providing alternative export routes, protecting existing ones, or providing storage to overcome provisional disruption will help out (Harks, 2010).  

In whole, three groups of approaches for mitigating the risk of energy transit disruptions are there: institutions, infrastructure, and market. Upgraded and new infrastructure may provide substitutes of export routes, protect present ones, or offer storage for overcoming provisional disruptions (Mansson et al., 2014). Similarly, institutions can face disruptions, through cooperative sharing. Additionally, markets are capable in reducing the economic fall-out due to oil and gas disruptions. In this way, important aspect to be emphasized is that these above approaches ought to be utilised together. Additionally, institutional approaches means to face the energy crises together with the energy market, rather than attempting to replace it (The World Bank, 2010).

In conclusion, from present low oil costs as well as oversupply of oil have compact energy supply security concerns; still there are countless conflicts as well as global disputes in the MENA region presenting serious threats. These conflicts occur at different scales as well as timeframes, through local disruptions. Firstly, globally, it is required to assess, with sophisticated economic as well as engineering analysis, the feasibility of several infrastructure alternatives for decreasing vulnerability to oil disruptions during energy transit. There should be an emphasize on growing regional institutional provisions for managing proactive as well as reactive responses for energy transit crises, for the MENA stakeholders. Therefore, advance progress is required on cooperative provisions amid existing MENA region as well as energy-exporter institutions with main global organizations. Finally, the global community must endure as well as strengthen energies for resolving the MENA region’s conflicts in the countries like Yemen, Libya, Iraq and Syria. On account for, better energy security would be a vital benefit for steadying these above mentioned states.

References:

Bahgat, G., 2008. Europe's energy security: challenges and opportunities. International Affairs, 82(5), pp.961-75.

Bailey, R. & Wellesley, L., 2017. Chokepoints and vulnerabilities in global food trade. London: Chatham House.

Brookings Doha Centre analysis paper, 2016. Risky Routes:Energy Transit in the Middle East. [Online] Available at: https://www.brookings.edu/wp-content/uploads/2016/07/en-energy-transit-security-mills-2.pdf [Accessed 24 November 2018].

European Parliament, 2017. egulation (EU) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC Text with EEA relevance. Official Journal of the European Union, 5(Chapter 12), pp.102-23.

Fattouh, B., 2008. How secure are Middle East oil supplies? Oxford: Oxford Institute for Energy studies.

Global Maritime HUb, 2018. Energy Transit in the Middle East. [Online] Available at: https://globalmaritimehub.com/articles/energy-transit-in-the-middle-east [Accessed 24 November 2018].

Harks, E., 2010. The International Energy Forum and the mitigation of oil market risks. Global energy governance: The new rules of the game, pp.247-67.

Mansson, A., Johansson, B. & Nilsson, L.J., 2014. Assessing energy security: An overview of commonly used methodologies. Energy, 73, pp.1-14.

Mills , R., 2018. Strait of Hormuz is not the most dangerous risk for blockade. [Online] Available at: https://www.thenational.ae/business/energy/strait-of-hormuz-is-not-the-most-dangerous-risk-for-blockade-1.755062 [Accessed 24 November 2018].

Oil Price, 2012. How Likely is a Blockade of the Strait of Hormuz? [Online] Available at: https://oilprice.com/Energy/Crude-Oil/How-Likely-is-a-Blockade-of-the-Strait-of-Hormuz.html [Accessed 24 November 2018].

Scarlet, N. et al., 2015. Renewable energy policy framework and bioenergy contribution in the European Union–An overview from National Renewable Energy Action Plans and Progress Reports. Renewable and Sustainable Energy Reviews, 51, pp.969-85.

The Conversation, 2018. Why is the Strait of Hormuz important? [Online] Available at: https://theconversation.com/why-is-the-strait-of-hormuz-important-99496 [Accessed 24 November 2018].

The World Bank, 2010. Energy in MENA. [Online] Available at: https://web.worldbank.org/archive/website01418/WEB/0__CO-46.HTM [Accessed 24 November 2018].