An Emergent Trans-Asian Energy Nexus

Likely Costs and Possible Benefits

Abstract

In this article, I state that the IEA predicts that global energy usage will continue to increase over the next twenty years by as much as 45%, driven largely by the emerging economies of North and South Asia. This assessment is most pertinent in relation to oil, which currently accounts for the largest share of global energy use due to the oil dependence of the transport sector. I point out that the major supplier of oil to the global market, West Asia’s Arabian/Persian Gulf, is also experiencing relatively high energy consumption growth, and the Gulf states have thus found themselves confronted with the paradox of needing to develop alternative energy sources for their own domestic use while requiring the world’s traditional dependence on oil to continue so that they can maintain their export revenues. To the extent that alternative energy sources are developed, the commerciality of the oil reserves of supplier states is made less secure. The article explains how the growth in oil consumption has also raised questions about the medium to long-term security of supply for Asian oil-importing states which have invested substantially in supply contracts and in acquiring equity in upstream production in the Gulf. I examine both the potential threats and benefits that might arise from this emerging trans-Asian oil nexus including the increasing dependence by Asian oil importers on supplies from an inherently unstable region, and the pursuit of alternate technologies by suppliers and consumers.