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Energy security - Emergency response
for oil in IEA countries
Cuauhtemoc Lopez-Bassols (consultant)
26-28th June 2018 , EU4Energy Policy Forum, Issyk-Kul, Kyrgyzstan
© IEA 2018
On no one quality, on no one process, on no one country, on no one route, and on no one field
must we be dependent….. Safety and certainty in oil lie in variety, and variety alone.
Winston Churchill
© IEA 2018
Table of content
1. Energy security
2. Energy security risks
3. Collaborative response
4. Supply side measures
5. Demand side measures
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ENERGY SECURITY
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ES – Definitions
“[…is the ] uninterrupted availability of energy sources at an affordable price” IEA
“[…is the ] effective management of primary energy supply from domestic and external sources, reliability of energy infrastructure, and ability of energy providers to meet current and future demand” WEC
“Adequate energy supplies at reasonable and stable prices to sustain economic performance and growth…. assess[ed] in terms of availability, accessibility, acceptability and affordability” APERC
“Sustainable production and use of energy at reasonable costs in order to facilitate economic growth and improve the quality of people’s lives” WB
“Continuous availability of energy in varied forms, in sufficient quantities and at reasonable prices” UNDP
“Secure adequate energy at reasonable prices necessary for the people’s lives, and economic and industrial activities of the economy” IEEJ
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ES - How it is measured
Global Energy
Institute
Global fuels
Fuel imports
Energy expenditures
Price and market
volatility
Energy use intensity
Electric power
Transportation sector
Environmental
World Energy Council
Security of supply and energy delivery
Diversity of primary energy supply
Energy consumption in relation to GDP
growth
Import dependence
Resilience
Diversity of electricity generation
Energy storage
Preparedness (human factor)
Internal
International agreement oil emergency
Local stability
Piracy threat
Primary energy diversity
Ease of doing business
External
Chokepoint
Export stability
Piracy threat
Oil export over GDP
APERC (not exhaustive)
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ES – Temporal dimension
• Long-term energy security deals
with timely investments to supply
energy in line with economic
developments and sustainable
environmental needs
• Short-term energy security
focuses on the ability of the energy
system to react promptly to sudden
changes within the supply-demand
balance Lack of energy security is thus linked to the negative economic
and social impacts of either physical unavailability of energy, or
prices that are not competitive or are overly volatile
Source: IEA
Short-term Long-term
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SUPPLY RISKS
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SR– Many risks
Social unrest Sabotage
Climatic events Accident Cyber
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SR–Energy issues monitor 2009-2017
10
Source: WEC
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2.0
2.0
4.3
5.6
4.1
4.3
2.1
2.6
2.3
1.5
1.3
1.5
0.0 1.0 2.0 3.0 4.0 5.0 6.0
Nov 1956 - Mar 1957
Jun - Aug 1967
Oct 1973 - Mar 1974
Nov 1978 - Apr 1979
Oct 1980 - Jan 1981
Aug 1990 - Jan 1991
Jun - Jul 2001
Dec 2002 - Mar 2003
Mar - Dec 2003
September 2005
September 2008
Feb - Oct 2011
Gross peak supply loss (mb/d)
Libyan Civil War
Hurricanes Gustav/IkeHurricanes Katrina/Rita
War in Iraq
Venezuelan strike
Iraqi oil export suspension
Iraqi invasion of Kuwait
Outbreak of Iran-Iraq warIranian Revolution
Arab-Israeli War and Arab oil embargo
Six-Day War
Suez Crisis
SR– Major oil supply disruptions
• Disruption severity is not only measured in oil lost
• Other factors are key in evaluation:
- Commercial inventories, duration, spare capacity, lost crude quality, seasonality, logistics etc.
• Each disruption must be assessed individually – market context is critical
Source: IEA
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COLLABORATIVE RESPONSE
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Large
Small
Imp
act
of
dis
rup
tio
n
Industry / market copes
Scope of disruption
District Country Region
Global
Local Govt
emergency
measures
National emergency
measures
Regional
group
emergency
measures
IEA Collective Action
CR–Who deals with an oil disruption?
Source: IEA
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CR–IEA Emergency Response
Industry
Increased
indigenous
production
Surge
Production
Supply Side
Stockdraw
Public: government or
Agency
Light-handed: Persuasion/ Public
campaigns
Medium: Driving restrictions,
speed reductions
Heavy-handed: Driving bans,
rationing
Multi-fired installations: Use of other
fuel source
Demand
restraint
Fuel switching
Demand Side
Adding liquidity to the market with extra barrels Constraining demand to rebalance market
Source: IEA
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SUPPLY-SIDE MEASURES
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SSM - Measures
• Stock-draw - Most commonly used & most effective
measure
- Obligated to hold at least 90 days net-imports
- 4.2 billion barrels: 1.5 public stocks for emergency
• Production Surge - Very limited for non-OPEC
- Little or no spare capacity outside OPEC
- Good oilfield practices limit extent of short-term surge
Total oil stocks in IEA regions
Source: IEA
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SSM - Stockholding systems
• Regimes vary across IEA countries
- Reflect differences in market structure, geography & national policy
- EU members need to comply with both IEA & EU systems (but same stocks can be used for both obligations)
- Two general approaches:
- Industry (compulsory & commercial stocks)
- Public stocks (held exclusively for emergencies):- ∙ Government stocks (financed by government budget)
∙ Agency (held / controlled by public bodies including industry owned / operated)
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Industry obligation
Estonia Belgium Germany Hungary Ireland Slovak
Republic
Czech Republic New Zealand
USA
Government Luxembourg
Greece Italy
Norway Sweden Turkey
UK
Austria Denmark
Netherlands Portugal
Switzerland Finland France Spain
Japan Korea
Poland
Commercial & operational stocks
Agency
SSM: Stockholding Options 3/3
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DEMAND SUPPLY MEASURES
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Demand side measures
Demand restraint
Most policies focus on transportation sector
Some potential in heating
Fuel switching
Significant decline since 1970s
Virtually no potential for short-term switching in transport
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DSM - Demand restraint
- Car- and ride-sharing
- Driving restrictions (e.g. speed limits, driving bans)
- Multi-fuel light-duty vehicles
- Pricing and parking policies
- Eco-driving
- Public transit (service upgrades & fare reductions)
- Employer and institutional measures
- Freight trucking…
- Fuel allocation (most extreme)
OECD Oil consumption by sector 1973-
2014
60
%
Source: IEA
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DSM - Demand restraint
• Short-term supply disruptions require different responses and measures than long-term energy savings promotion
• Oil price signals can help consumers respond to a disruption and subsidies distort price signals
• Rationing should be a last resort
• Most measures require advanced planning
• “Pull” measures preferable to “push” measures
Speed limits
Driving bans
Congestion charging
Parking pricing
Public Transit (upgrades & fare cuts)
Telecommuting
Flexible work hours / Compressed work week
Parking ‘cash-outs’ / Public transit vouchers
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DSM: Regional differences
Oil c
on
sum
ed
in
th
e R
oad
Sect
or
(th
ou
san
d B
PD
)
Total on-road fuel consumption (billion litres gasoline equivalent)
Potential savings across all measures
Potential savings omitting ‘high impact’ measures
2000
1000
0
12000
9000
6000
3000
0
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DSM - Demand restraint - Example
Measure (note that different measures can overlap,
so savings cannot be added)
Potential range of oil
savings
Car / ride sharing ~ 15%
Driving restrictions - light ~5-7%
Driving restrictions - heavy ~25% - 34%
Ecodriving ~4% - 10%
Freight / logistics ~1% - 4%
Employer / institutional measures ~1% - 4%
Public transit / mode shift ~1% - 2%
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DSM: Building a policy
• Steps / considerations to building a policy implementable in an emergency:
- Primary legislation
- Secondary legislation
- Implementation / operational manual
- Identification of stakeholders
- Definition of roles, procedures
- Communication & public strategy
- Testing & exercises
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DSM: Fuel switching (oil)
• Seeks to reduce the use of oil during a supply disruption
• Encourages the use of other energy sources alternative to oil: - e.g. coal or natural gas instead of oil in electricity production
• Significantly less potential since 1970s
• Oil-fired electricity generation worldwide has declined since 70s: - 1973 - 21%
- 2012 - 4%
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DSM - Fuel switching (oil)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
World electricity output by source
1971-2015
Coal, peat and oil shale Primary and secondary oil
Natural gas Nuclear
Renewables (incl hydro)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IEA electricity output by source
1971-2015
Coal, peat and oil shale Primary and secondary oil
Natural gas Nuclear
Renewables (incl hydro)
Source: IEA
4% 2% 21
%
21
%
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Discussion questions
• Has your country experienced a severe oil supply
disruption?
• How did your country deal with it?
• What measures exist in your own country to increase
supply/reduce demand in an oil supply emergency?
• What is the scope for regional cooperation in a crisis?
© IEA 2018