15th March, 2011
Francis Hualupmomi, International Security Analyst in PR China
Australia has done less in enhancing PNGDF’s power projection in post-independence era. With changing pattern in geopolitics constructing emerging security issues and challenges in the region, and international responsibility, there is need to review the current Australia-PNG Strategic/Defence Cooperation.
There is already a shift in geopolitics from the west to the east - rise of China in Asia - and diffusion of power from state to non-state actors. Asia is now seen as the economic cockpit in driving global economy. Given this changing pattern, we expect more challenges in regional security posture. The LNG projects pose potential risks to non-traditional security issues such as terrorism and transnational crimes - piratism, illegal gun trade, etc. The presence of U.S-based Exxon Mobile in PNG projects high security risk from terrorists, for instance, disruption of oil shipment in maritime theatre by terrorists groups. The Vision 2050 and natural disasters also construct uncertain environments, which instruct realignment in military structures and doctrines.
In addition, PNG’s move to participate in international peacekeeping operations under UN demands military power projection. The war torn theatres are highly hostile, which demand smart modernized defence force. PNGDF lacks capacity and capability power projection in this new responsibility.
Given this projected security scenario, what can Australia do? Australia should reconsider reviewing the strategic partnership arrangement, and enhance PNGDF strategic capacity and capability to meet new security challenges. PNG lacks modernized continental, blue water and air power. Continental power should be increased from its current size of 2, 000-10, 000 military personnel. More so, most of the defence force armaments - naval ships and airships - are outdated. PNG needs modernized continental, air and sea power capabilities with high speed and precision to monitor external threats (border-maritime), for national emergencies and development, and UN peacekeeping operations.
Australia should not continue to play neo-colonial cards. PNG’s strategic modernization should not be calculated by Australia as a strategic threat, rather as an important economic and strategic partner in maintaining peace and stability in the region. With China now competing with U.S over energy sources in PNG, Australia’s relationship with PNG may slowly change should less is done. PNG has the potential to shift policy outcomes by using energy as a bargaining chip to gain more where it independently calculates as necessary in consistent with its national interest.
Wednesday, March 23, 2011
Friday, March 11, 2011
Shifting Dynamics in Sino-U.S Foreign Policy and Global Diplomacy: PNG’s Strategic and Economic Positioning in Summit Diplomacy
It appears that 2011 will be an important year in the calendar of geopolitics with a new look Sino-U.S foreign policy and global diplomacy, one in which that characterizes more focus on high key issues discerning structural power relations than low key issues. An important phenomenon is the rising prominence of PNG in geopolitics given its geostrategic-economic importance in energy resources. To begin with, it is worth elucidating the dynamics of structural power relations for ordinary Papua New Guineans to understand how states interact with each other in the changing pattern of world politics driven by complex process of globalization.
The question worth positing is: how can PNG rationally position itself in the thin red line between the hegemon, U.S and the phenomenal peaceful rising China in the east. The year 2011 is coined by the Chinese Foreign Minister in a week-long National People Congress (NPC) meeting in Beijing this month (March 2011) as the year of Summit Diplomacy rekindling a shifting dynamics of her foreign policy and global diplomacy, in which China will play an active role as a responsible actor in the international community in resolving global issues concerning economic globalization and strategic interactions.
Meanwhile, the late recent high level state visit to U.S by Chinese President, Hu Jintao, appears to be a manifestation of a normal diplomatic process of appeasement eloquently engraving a positive trajectory. In an interesting sense, by way of content intelligence, one could calculate the constellation of security dilemma propelled by relatively increasing fear and mistrust by U.S with the rising preponderant power in the east. The exposition in this structural power relation supposidingly sounds conflicting with China’s growing peaceful influence in global affairs. This is evidently consistent with Hillary Clinton’s late recent strategic concern over China’s growing peaceful engagement in U.S Pacific backyard.
Through the lens of strategic calculus, it seems obvious now with Clinton strongly voicing shifting high budget priority in real-politico than low-politico issues such as humanitarian schemes. U.S is extremely unsettled with Chinese growing peaceful influence in Pacific, especially in PNG, Fiji, Solomon Islands, and Tonga. Interestingly significant, PNG has now been given high prominence and is equated as one of the key economic players in geopolitics of energy with Clinton’s high level state visit in 2010 and its eminence in U.S Congress this month (March, 2011). Clinton has relentlessly observed and mirrored geostrategic-economic essence of PNG given its abundance of energy resources. PNG will become one of U.S core interests in its foreign policy as far as shifting dynamics in real-politics is concerned.
The Pacific theatre will regain international posture as one of the strategic interaction playing grounds. What we are witnessing now is well articulated by Michael Clare, U.S defence analyst, in his new book entitled: Rising Powers, Shrinking Planet, a competition between big and rising powers over world’s remaining energy resources. It is obvious that the stake is high. U.S foreign policy, by the assessment of Clinton’s tone, will be one of a strategic choice combining strategy of containment and a revisit of Eisenhower’s and Carter’s Doctrines. The strategic motive and intent of U.S is clear: containing China’s peaceful access to energy sources and securing and protecting energy source sites and routes against potential adversaries. This strategy may cause tension with China and position PNG in an awkward situation, therefore, a constructive engagement strategy is strategically imperative to ensure cooperation.
Given the constellation of this new emerging security conundrum in the 21st century in the region, a major strategic reconfiguration and realignment in military structures and doctrines and alliances are also shaping strategic policy options. The Bush’s Pacific Year reinforced by Obama’s regime, and Australia’s and New Zealand’s defence realignments with an objective to reconstruct a defensive and offensive system against China and other potential threats will be the strategic maneuvering focus in consistent with U.S core interest. Engaging China in strategic cooperation is a win-win situation for all actors concerned.
Clinton’s strategic concern in the Congress concerning PNG and Pacific region, barks at time when PNG is on air with China in a move to secure a partnership in the high impact LNG project. Although China argues its position is purely on energy security than dollar diplomacy, U.S on the other hand calculates it otherwise. The U.S sees China’s bid as a strategic competition. The more China gain relatively, the more it poses a threat to U.S hegemonic leadership - relative gains matters in U.S foreign policy. U.S should see China as an important partner in energy cooperation.
Intrinsically, China strongly supports a multipolar world with an equal playing field. Although, it still respects U.S global leadership, China is more concerned with persistent asymmetrical structural power relationship. China believes in a harmonious and peaceful coexistence in the international system premised on five norms and principles of her foreign policy. More so, with respect to the disposition of global competition, China strongly discourages discriminatory competition and calls for an equal playing field and articulates that U.S plays an accommodating role for developing countries in international relations. A win-win diplomacy without “upsetting the rules of the great power game” is the bedrock of Chinese smart soft power diplomacy, an approach coined by U.S leading neo-liberalist scholar, Professor, Joseph Nye.
Given the magnitude of dramatically shifting dynamics of Sino-U.S foreign policy and global diplomacy, PNG must play a smart diplomacy to rationally position itself in the organizing logic of great power game. The coming 2011 APEC Summit in Hawaii is highly crucial for PNG to seize the opportunity to pursue its national interest by maneuvering the game. China aims to achieve a win-win situation through the summit diplomacy (means using the G20, APEC, Shanghai cooperation, BRIC and other summits to pursue its interest). This is the opportunity wherein PNG could negotiate an absolute gain package. China strongly encourages a win-win situation between U.S and PNG. A zero-sum game will not be in the best interest of all parties.
More critically, PNG should play a neutral diplomacy to avoid tension between China and U.S. which could jeopardize the trilateral relations. PNG’s role in energy diplomacy has the propensity to construct a miscalculation of tension and conflict in the region. Energy diplomacy between China and U.S must be handled with great cautiousness. PNG as a neutral source partner should treat both as equally important partners through mutual cooperation to avoid future conflict. The LNG project has greater significance than most pessimists in PNG would critically think otherwise without having a concrete knowledge of its dynamics at international political and economic playing field. The LNG projects anchored by the National Alliance Coalition Government has strategically position PNG among conventional key economic players such as the Saudi Arabia, Nigeria, Libya, Venezuela, and others in the global market economy.
In essence, the LNG project could be used as a political leverage to influence policy outcomes in the global market economy. PNG could project a middle power status in the region as long as it plays smart diplomacy between U.S and China. What it can do is to pursue a positive-zero-sum game within the framework of energy cooperation to build and enhance strategic capability as it gain grounds in economic sphere. The LNG project has the potential to develop a highly sustainable modern defensive military force with land, air and maritime power to safeguard economic, border and maritime interests. Security (both conventional and non-conventional) will become a growing need as PNG navigates into uncertain and hostile theatres, especially in international responsibilities under the blue beret and internal and regional non-conventional security challenges.
With increasingly important role which PNG will have to play in the new geopolitics of energy, what it also needs is an intelligent core group of Sino-U.S foreign policy specialists in analyzing and providing thoughtful, quality and timely informative policy options in pursuing its national interest in global diplomacy. PNG needs smart thinkers with adequate knowledge and skills in current shift in international relations. In sum, cooperative diplomacy should be pursued by all parties to ensure a win-win situation.
The author studies a Master of Arts in International Relations at the Institute of International Studies, Jilin University, China. Email address: f.hualupmomi@yahoo.com. Note: The views expressed here are part of author’s scholarly work and does not necessarily represent any organization or person.
The question worth positing is: how can PNG rationally position itself in the thin red line between the hegemon, U.S and the phenomenal peaceful rising China in the east. The year 2011 is coined by the Chinese Foreign Minister in a week-long National People Congress (NPC) meeting in Beijing this month (March 2011) as the year of Summit Diplomacy rekindling a shifting dynamics of her foreign policy and global diplomacy, in which China will play an active role as a responsible actor in the international community in resolving global issues concerning economic globalization and strategic interactions.
Meanwhile, the late recent high level state visit to U.S by Chinese President, Hu Jintao, appears to be a manifestation of a normal diplomatic process of appeasement eloquently engraving a positive trajectory. In an interesting sense, by way of content intelligence, one could calculate the constellation of security dilemma propelled by relatively increasing fear and mistrust by U.S with the rising preponderant power in the east. The exposition in this structural power relation supposidingly sounds conflicting with China’s growing peaceful influence in global affairs. This is evidently consistent with Hillary Clinton’s late recent strategic concern over China’s growing peaceful engagement in U.S Pacific backyard.
Through the lens of strategic calculus, it seems obvious now with Clinton strongly voicing shifting high budget priority in real-politico than low-politico issues such as humanitarian schemes. U.S is extremely unsettled with Chinese growing peaceful influence in Pacific, especially in PNG, Fiji, Solomon Islands, and Tonga. Interestingly significant, PNG has now been given high prominence and is equated as one of the key economic players in geopolitics of energy with Clinton’s high level state visit in 2010 and its eminence in U.S Congress this month (March, 2011). Clinton has relentlessly observed and mirrored geostrategic-economic essence of PNG given its abundance of energy resources. PNG will become one of U.S core interests in its foreign policy as far as shifting dynamics in real-politics is concerned.
The Pacific theatre will regain international posture as one of the strategic interaction playing grounds. What we are witnessing now is well articulated by Michael Clare, U.S defence analyst, in his new book entitled: Rising Powers, Shrinking Planet, a competition between big and rising powers over world’s remaining energy resources. It is obvious that the stake is high. U.S foreign policy, by the assessment of Clinton’s tone, will be one of a strategic choice combining strategy of containment and a revisit of Eisenhower’s and Carter’s Doctrines. The strategic motive and intent of U.S is clear: containing China’s peaceful access to energy sources and securing and protecting energy source sites and routes against potential adversaries. This strategy may cause tension with China and position PNG in an awkward situation, therefore, a constructive engagement strategy is strategically imperative to ensure cooperation.
Given the constellation of this new emerging security conundrum in the 21st century in the region, a major strategic reconfiguration and realignment in military structures and doctrines and alliances are also shaping strategic policy options. The Bush’s Pacific Year reinforced by Obama’s regime, and Australia’s and New Zealand’s defence realignments with an objective to reconstruct a defensive and offensive system against China and other potential threats will be the strategic maneuvering focus in consistent with U.S core interest. Engaging China in strategic cooperation is a win-win situation for all actors concerned.
Clinton’s strategic concern in the Congress concerning PNG and Pacific region, barks at time when PNG is on air with China in a move to secure a partnership in the high impact LNG project. Although China argues its position is purely on energy security than dollar diplomacy, U.S on the other hand calculates it otherwise. The U.S sees China’s bid as a strategic competition. The more China gain relatively, the more it poses a threat to U.S hegemonic leadership - relative gains matters in U.S foreign policy. U.S should see China as an important partner in energy cooperation.
Intrinsically, China strongly supports a multipolar world with an equal playing field. Although, it still respects U.S global leadership, China is more concerned with persistent asymmetrical structural power relationship. China believes in a harmonious and peaceful coexistence in the international system premised on five norms and principles of her foreign policy. More so, with respect to the disposition of global competition, China strongly discourages discriminatory competition and calls for an equal playing field and articulates that U.S plays an accommodating role for developing countries in international relations. A win-win diplomacy without “upsetting the rules of the great power game” is the bedrock of Chinese smart soft power diplomacy, an approach coined by U.S leading neo-liberalist scholar, Professor, Joseph Nye.
Given the magnitude of dramatically shifting dynamics of Sino-U.S foreign policy and global diplomacy, PNG must play a smart diplomacy to rationally position itself in the organizing logic of great power game. The coming 2011 APEC Summit in Hawaii is highly crucial for PNG to seize the opportunity to pursue its national interest by maneuvering the game. China aims to achieve a win-win situation through the summit diplomacy (means using the G20, APEC, Shanghai cooperation, BRIC and other summits to pursue its interest). This is the opportunity wherein PNG could negotiate an absolute gain package. China strongly encourages a win-win situation between U.S and PNG. A zero-sum game will not be in the best interest of all parties.
More critically, PNG should play a neutral diplomacy to avoid tension between China and U.S. which could jeopardize the trilateral relations. PNG’s role in energy diplomacy has the propensity to construct a miscalculation of tension and conflict in the region. Energy diplomacy between China and U.S must be handled with great cautiousness. PNG as a neutral source partner should treat both as equally important partners through mutual cooperation to avoid future conflict. The LNG project has greater significance than most pessimists in PNG would critically think otherwise without having a concrete knowledge of its dynamics at international political and economic playing field. The LNG projects anchored by the National Alliance Coalition Government has strategically position PNG among conventional key economic players such as the Saudi Arabia, Nigeria, Libya, Venezuela, and others in the global market economy.
In essence, the LNG project could be used as a political leverage to influence policy outcomes in the global market economy. PNG could project a middle power status in the region as long as it plays smart diplomacy between U.S and China. What it can do is to pursue a positive-zero-sum game within the framework of energy cooperation to build and enhance strategic capability as it gain grounds in economic sphere. The LNG project has the potential to develop a highly sustainable modern defensive military force with land, air and maritime power to safeguard economic, border and maritime interests. Security (both conventional and non-conventional) will become a growing need as PNG navigates into uncertain and hostile theatres, especially in international responsibilities under the blue beret and internal and regional non-conventional security challenges.
With increasingly important role which PNG will have to play in the new geopolitics of energy, what it also needs is an intelligent core group of Sino-U.S foreign policy specialists in analyzing and providing thoughtful, quality and timely informative policy options in pursuing its national interest in global diplomacy. PNG needs smart thinkers with adequate knowledge and skills in current shift in international relations. In sum, cooperative diplomacy should be pursued by all parties to ensure a win-win situation.
The author studies a Master of Arts in International Relations at the Institute of International Studies, Jilin University, China. Email address: f.hualupmomi@yahoo.com. Note: The views expressed here are part of author’s scholarly work and does not necessarily represent any organization or person.
Political Economy of Energy Security: Oil Peak and Mitigation and Risk Management Strategy
By Francis Hualupmomi
Oil peak is imminent and has severe political and economic implications in global and national economies. Given this energy security dilemma how can PNG respond to it as far as national security is concerned?
What is Oil Peak?
In economic terminology, Oil Peak is an economic situation in which the global maximum production of oil has reached a point and then slowly declines until it reaches depletion in producing countries. It is quite different from oil depletion. Oil depletion occurs when there is a decline in oil reserves and supply as opposed to peak oil which refers to a maximum point of production.
Oil is a scarce non-renewable resource which if consumed overtime exponentially will reach a maximum point of peak where it will decline either slowly or rapidly depending on the production and consumption rate influenced by the forces of demand and supply. The impact of oil peak has severe implications in the global economy.
Macro Scenario
At macro level, global demand of energy grows by 40 percent between 2007 and 2030, with fossil fuels accounting for more than three quarter of the increase.
Non-OECD countries account for 93 percent of the increase in world primary energy demand and all of the growth in oil demand, which rises from 85 mb/d in 2008 to 105 mb/d in 2030. Demand of oil is surging exponentially in the Newly Industrialized Countries (NICs) or developing countries in particular Asia with China and emerging India. OPEC is and will continue to be the major supplier of conventional and unconventional oil as non-OPEC peaks (OECD/IEA – 2009).
Modernization, industrialization and rapid population will trigger heavy dependence on energy, especially oil. China and India both have seen increase rates of energy consumption respectively to drive their modernization agenda. For instance, China has seen an 8 percent annual growth rate of energy consumption since 2008. Consumption of oil revolves around three main sectors of the economy: transport; agriculture; and industrial system. The most highly energy consumption sector is transportation with heavy consumption of commuters (personal-used vehicles) which consumes a lot of combustion fuels of about 55 percent globally.
Micro Scenario
At micro level, PNG will soon be considered as one of the major oil and gas suppliers come its full economization in 2014 should there is no social disruptions. The life span of the LNG project is projected at approximately more than 30 years sufficient to supply the global economy.
Although some petroleum pessimists predict oil depletion by 2030, PNG will still continue to meet a global demand due to the fact that it was not producing energy at the time of energy forecasting. We may expect a different scenario should and when LNG is in full operation.
In PNG, the transportation sector followed by population and agriculture are the main consumption of energy resource. The transportation sector consumes more than half of the aggregate energy consumption. With increasing population growing at about 2.5 percent annually, the demand of energy consumption will also surge imposing an acute pressure on production of oil.
Although the agriculture sector is a semi-industrial typology which consumes less energy as opposed to other sectors, the modernization drive in PNG will diversify the economy in future to modern agriculture technologies with heavy reliance on energy use. For instance, the conversion of ammonia into fertilizers through the Haber process consumes a lot of oil.
Possible Political and Economic Implications
Oil peak and depletion have severe implications in the global and national economy. First, a surge in oil price could lead to price shock and economic recession. As the oil production reaches its peak it is expected to trigger price increase. The high oil price will construct economic recession which has domino-effects in the global and national economy.
Second, the recession will cause a stiff increase in food prices leading to famine and population decline. As food prices increase, people with less income may face poverty leading to population decline. It is estimated that the world population (including PNG) will decrease by about 2 billion circa in 2050 as a resultant. For instance, people would die of malnutrition. In PNG, this situation may have severe effects in urban centers with ample settlements than in rural areas. Rural areas will face an average effect due to availability of agricultural food crops to sustain itself.
Third, we expect political instability as a result of economic instability caused by peak oil crisis. The government will be under extreme pressure from the public to restore the status quo through policy realignment. This situation may possibly lead to the final effect; social chaos and instability. It is most likely that if the government fails to manage the oil peak crisis, the populace can revolt against the state fueling social violence and disorder.
Mitigation and Risk Management Strategy
Against this backdrop of political and economic implication pose by oil peak in the future it is necessary that the government take a pre-emptive approach by developing a comprehensive Energy Mitigation and Risk Management Strategy.
It is projected that global conventional oil production may expect a decline by 2030 as predicted. The policy package should consider 63 mb/d of gross capacity to be installed between 2011 and 2030. It is viable that a 20 year advancement strategic plan is a safe precautionary security measure a country could take. Oil supply security and response measures can be approached in a two-way strategic approach:
1. The short term oil supply disruptions responses measures include: emergency oil stock draw, demand restrain, fuel switching, standby production and information sharing; and
2. Long term measures (energy policy): diversification of oil imports sources, efficiency of oil use, enhancing fuel flexibility, investment in alternative sources and technologies, removal of market impediments, and dialogue between producers and consumers.
When price increases the government can deploy demand restraint by cutting down on import/consumption through price effect, persuasion and mandatory measures, e.g. voluntary energy use reduction, temporary ban on some energy use equipments such as vehicles, market-oriented approach through auctioning of coupon. This exercise, however, may be very costly which can lead to misallocation of resources.
Fuel switching or a shift from fossil fuel to alternative fuels such as bio-fuel or nuclear energy or unconventional fuel is also important. Alternative energy could be derived from hydro, food crops, wind, ocean, etc to substitute price increase.
The standby oil production and spare capacity also helps during emergency with spare capacity to increase production. It helps as a supplement oil supply and stabilizes market. The standby production should be not less than 2.5 percent.
The emergency oil stocks have advantage by being openly available, more visible and transparent, can affect market perceptions effectively, deterrent to politically and economically motivated disruptions and avoid misallocation of resources through demand restraint.
Information sharing removes uncertainty and minimizes rogue or cheating actors. Key players in energy market can distort oil market price through cheating, hence, sharing of information among political and economic actors reduces security dilemma.
Conclusion
Oil peak is imminent given the unprecedented unsustainable production and consumption of oil globally. Given this pessimistic scenario, it is strategically imperative that the government develop a comprehensive Energy Mitigation and Risk Management Strategy to avoid possible future economic shocks and social chaos.
Oil peak is imminent and has severe political and economic implications in global and national economies. Given this energy security dilemma how can PNG respond to it as far as national security is concerned?
What is Oil Peak?
In economic terminology, Oil Peak is an economic situation in which the global maximum production of oil has reached a point and then slowly declines until it reaches depletion in producing countries. It is quite different from oil depletion. Oil depletion occurs when there is a decline in oil reserves and supply as opposed to peak oil which refers to a maximum point of production.
Oil is a scarce non-renewable resource which if consumed overtime exponentially will reach a maximum point of peak where it will decline either slowly or rapidly depending on the production and consumption rate influenced by the forces of demand and supply. The impact of oil peak has severe implications in the global economy.
Macro Scenario
At macro level, global demand of energy grows by 40 percent between 2007 and 2030, with fossil fuels accounting for more than three quarter of the increase.
Non-OECD countries account for 93 percent of the increase in world primary energy demand and all of the growth in oil demand, which rises from 85 mb/d in 2008 to 105 mb/d in 2030. Demand of oil is surging exponentially in the Newly Industrialized Countries (NICs) or developing countries in particular Asia with China and emerging India. OPEC is and will continue to be the major supplier of conventional and unconventional oil as non-OPEC peaks (OECD/IEA – 2009).
Modernization, industrialization and rapid population will trigger heavy dependence on energy, especially oil. China and India both have seen increase rates of energy consumption respectively to drive their modernization agenda. For instance, China has seen an 8 percent annual growth rate of energy consumption since 2008. Consumption of oil revolves around three main sectors of the economy: transport; agriculture; and industrial system. The most highly energy consumption sector is transportation with heavy consumption of commuters (personal-used vehicles) which consumes a lot of combustion fuels of about 55 percent globally.
Micro Scenario
At micro level, PNG will soon be considered as one of the major oil and gas suppliers come its full economization in 2014 should there is no social disruptions. The life span of the LNG project is projected at approximately more than 30 years sufficient to supply the global economy.
Although some petroleum pessimists predict oil depletion by 2030, PNG will still continue to meet a global demand due to the fact that it was not producing energy at the time of energy forecasting. We may expect a different scenario should and when LNG is in full operation.
In PNG, the transportation sector followed by population and agriculture are the main consumption of energy resource. The transportation sector consumes more than half of the aggregate energy consumption. With increasing population growing at about 2.5 percent annually, the demand of energy consumption will also surge imposing an acute pressure on production of oil.
Although the agriculture sector is a semi-industrial typology which consumes less energy as opposed to other sectors, the modernization drive in PNG will diversify the economy in future to modern agriculture technologies with heavy reliance on energy use. For instance, the conversion of ammonia into fertilizers through the Haber process consumes a lot of oil.
Possible Political and Economic Implications
Oil peak and depletion have severe implications in the global and national economy. First, a surge in oil price could lead to price shock and economic recession. As the oil production reaches its peak it is expected to trigger price increase. The high oil price will construct economic recession which has domino-effects in the global and national economy.
Second, the recession will cause a stiff increase in food prices leading to famine and population decline. As food prices increase, people with less income may face poverty leading to population decline. It is estimated that the world population (including PNG) will decrease by about 2 billion circa in 2050 as a resultant. For instance, people would die of malnutrition. In PNG, this situation may have severe effects in urban centers with ample settlements than in rural areas. Rural areas will face an average effect due to availability of agricultural food crops to sustain itself.
Third, we expect political instability as a result of economic instability caused by peak oil crisis. The government will be under extreme pressure from the public to restore the status quo through policy realignment. This situation may possibly lead to the final effect; social chaos and instability. It is most likely that if the government fails to manage the oil peak crisis, the populace can revolt against the state fueling social violence and disorder.
Mitigation and Risk Management Strategy
Against this backdrop of political and economic implication pose by oil peak in the future it is necessary that the government take a pre-emptive approach by developing a comprehensive Energy Mitigation and Risk Management Strategy.
It is projected that global conventional oil production may expect a decline by 2030 as predicted. The policy package should consider 63 mb/d of gross capacity to be installed between 2011 and 2030. It is viable that a 20 year advancement strategic plan is a safe precautionary security measure a country could take. Oil supply security and response measures can be approached in a two-way strategic approach:
1. The short term oil supply disruptions responses measures include: emergency oil stock draw, demand restrain, fuel switching, standby production and information sharing; and
2. Long term measures (energy policy): diversification of oil imports sources, efficiency of oil use, enhancing fuel flexibility, investment in alternative sources and technologies, removal of market impediments, and dialogue between producers and consumers.
When price increases the government can deploy demand restraint by cutting down on import/consumption through price effect, persuasion and mandatory measures, e.g. voluntary energy use reduction, temporary ban on some energy use equipments such as vehicles, market-oriented approach through auctioning of coupon. This exercise, however, may be very costly which can lead to misallocation of resources.
Fuel switching or a shift from fossil fuel to alternative fuels such as bio-fuel or nuclear energy or unconventional fuel is also important. Alternative energy could be derived from hydro, food crops, wind, ocean, etc to substitute price increase.
The standby oil production and spare capacity also helps during emergency with spare capacity to increase production. It helps as a supplement oil supply and stabilizes market. The standby production should be not less than 2.5 percent.
The emergency oil stocks have advantage by being openly available, more visible and transparent, can affect market perceptions effectively, deterrent to politically and economically motivated disruptions and avoid misallocation of resources through demand restraint.
Information sharing removes uncertainty and minimizes rogue or cheating actors. Key players in energy market can distort oil market price through cheating, hence, sharing of information among political and economic actors reduces security dilemma.
Conclusion
Oil peak is imminent given the unprecedented unsustainable production and consumption of oil globally. Given this pessimistic scenario, it is strategically imperative that the government develop a comprehensive Energy Mitigation and Risk Management Strategy to avoid possible future economic shocks and social chaos.
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