Energy Security: Applying a Portfolio Approach

With oil prices skyrocketing to new levels, and the demand for energy increasing at a pace commensurate with the rapidity of globalization, energy access and supply take on a critical dimension for the national security of all states. The topic of energy access is also closely linked to climate change issues through the release of carbon dioxide (CO2) gas into the atmosphere and the aspirations of developing countries to achieve economic growth through increased consumption levels. Given its weighty consequences for the future, the subject of energy security now finds itself as a common theme on the curricula, research menus, and agendas of most military institutions of higher learning, international security think-tanks, and ministries of defence. Teaching or discussing this topic with military officers or diplomats requires a simple methodology to conceptualize energy security at the state level as well as to provide a basic understanding of the key concepts and definitions. With such an approach, non-energy experts can then derive general ideas or conclusions for new directions in energy policy. With such a goal in mind, this article explores the topic of energy security education by: defining energy security; highlighting the trends and challenges that will vex countries in the next few decades; and proposing a portfolio approach from the banking and finance world for conceptualizing this issue at the state level. Within the portfolio approach, the principles of both source and supplier diversification are explained, and then applied to case examples taken from Asia and the Baltics to illustrate how this simple model can aid in the discussion and development of policy options and ideas for national decision-makers. The conclusion shows that while the portfolio model is useful for a general overview to energy security, the approach does have limitations for addressing the theme comprehensively.