Tied to Oil: Can Renewable Energies Really Reduce Geopolitical Dependencies?
By: Aleksander Jevtic
On 14 September 2019, a drone strike in Saudi Arabia hit the processing facility, Abqaiq, owned by ‘Saudi Aramco’, the world’s largest processor of crude oil. This decreased global oil production by 5.7 million barrels a day, which amounts to roughly 5% of global output. Houthi rebels in Yemen claimed to be responsible for the attack, a claim still being disputed by Saudi Arabia and the USA, who assign the sole responsibility for the strike to the Iranian government.
In response to the event, oil prices were temporarily soaring, climbing by 8.7% to $65.49 per barrel two days after the attack. However, according to the Saudi government, only two days were necessary to restore oil production to levels from before the attack. This was thanks to the country’s spare production capacity of 2.27 million barrels per day, which can be activated in emergency situations, as well as the country’s extensive oil reserves which can be partially shipped abroad if necessity arises.
However, even if the recent oil shock was mitigated thanks to Saudi Arabia’s quick adaption mechanisms, the event once again sparked debates about the worrying dependence of many countries on oil imports from OPEC members.
Most countries have large oil and gas reserves of their own in order to prevent uncertainties in global markets as well as negative economic consequences in times of shortages. With 600 million barrels of oil, the United States holds the largest of such reserves in the world. In the European Union, a region whose energy security has historically been vulnerable due to a high dependence on oil and gas imports, a 1968 directive (passed during the times of the ‘European Community’) requires member states to have a strategic petroleum reserve for at least 90 days of average domestic consumption. The reason is that in situations of uncertainty, governments should be able to rely on reserves to fend off market speculation, or a full out energy crisis should the situation be more grave. However, despite the reserves, the international community has a strong dependency on fossil fuel exporters even today.
This might be about to change. With the global climate change movement on the rise, as vividly illustrated by the climate strikes in Montreal on 27 September 2019, it is expected that policy-makers will take more resolute steps towards creating ‘green economies’. As the most developed countries turn increasingly to renewable energies over fossil fuels, the political dependency on oil-processing countries like Saudi Arabia will decrease as well.
Is this shift in international relations something that can be expected in the near future? The answer to that question is dependant on technological advances. From the perspective of policy makers, the capacity for producing more renewable energy does not necessarily imply less dependance on fossil fuels, not until these energies can be stored as effectively, and as cheaply, as oil and gas, in order to be utilisable during supply shocks. According to Azzuni and Breyer, a variety of storage techniques can allow for comparable degrees of energy security as compared with oil and gas. These technologies range from Pump Hydro Storage (PHS), whereby electricity is used to pump water into elevated reservoirs, Thermal Energy Storage (TES), whereby thermal energy is stocked by heating or cooling of a storage medium, or simply by advanced lithium batteries.
The biggest problem with storing renewable energy at a large scale is cost. According to an article by David Roberts in ‘VOX’, storage costs for renewables would have to fall to $20 USD per kilowatt hour in order to be competitive with fossil energy storage. This would require a whopping 90% decrease in current costs. Research on large-scale storage batteries is advancing at a pace that leads optimistic observers to expect a tipping point by 2030, though this may never quite be achieved given that these storage methods often require material expenditures that would be prohibitive of a 90% cost reduction. However, Roberts adds that the decreasing costs of renewable energy production will likely decrease the pressure on storage, allowing for a gradual transition to a renewable economy.
Hence, it seems to be just a question of time before renewable energy security transforms to being managed in a similar way as fossil fuel security is today, e.g. required by EU law, as discussed above. Once this transition occurs, fossil fuel supply shocks will be met with less outrage from markets and policy-makers in countries that are today dependant on OPEC imports, as was the case this past September. It appears that the move towards greener economies is not only an ecological necessity, but an anticipated geopolitical game changer.
Resources used:
Azzuni, Abdelrahman, and Christian Breyer (2018): “Energy Security and Energy Storage Technologies.” Energy Procedia 155 (2018): 237–58.
BBC (2019): “Climate change: Montreal sees hundreds of thousands strike.” URL: https://www.bbc.co.uk/news/av/world-us-canada-49855885/climate-change-montreal-sees-hundreds-of-thousands-strike; (Accessed: 5th October 2019).
David Roberts: “Getting to 100% renewables requires cheap energy storage. But how cheap?” URL: https://www.vox.com/energy-and- environment/2019/8/9/20767886/renewable-energy-storage-cost-electricity (Accessed: 5th October 2019).
EU Council (1968): “Minimum stocks of crude oil and/or petroleum products.” Council Directive 68/414/EEC; URL: https://web.archive.org/web/20060826233332/http://europa.eu/scadplus/leg/en/lvb/l27045.htm (Accessed: 5th October 2019).
Sparshott, Jeffrey (2019): “Newsletter: Oil Prices Soar, Auto Workers Strike, China’s Economy Cools.” Wall Street Journal Web Edition; URL: https://blogs.wsj.com/economics/2019/09/16/newsletter-oil-prices-soar-auto-workers- strike-chinas-economy-cools/?guid=BL-REB- 39597&mod=searchresults&page=9&pos=20&dsk=y (Accessed: 5th October 2019).
Ramkumar, Amrith (2019): “Crude Prices Soar After Attack on Saudi Facilities, Threatening Global Growth.” URL: https://www.wsj.com/articles/oil-prices-soar-after-saudi- attack-11568585160?mod=searchresults&page=10&pos=1 (Accessed: 5th October 2019).