By Mandeep K Bhandal, on 7 February 2013
ISRS Research Manager, Mandeep Bhandal provides a brief assessment on the irresilience in the energy system and how ISRS’ forthcoming publication, ‘Resource Resilience’ will address the complexities.
By 2030, the global population will reach 8.3 billion people. Within this population increase, it is the growth of the middle classes that is dramatic – implying a greater consumption. Scarcity of global resources to meet global demand is perhaps the most pressing challenge we as citizens, businesses and our governments face. Yet, there is plenty of reason to be optimistic. The International Energy Agency (IEA), an intergovernmental organisation and OPEC’s counterpart affirms growing global production of key fossil fuels in the coming decades. Much of the increased production is to be found from unconventional oil and gas, in which the US has seized a strategic lead over the last few years.
Assessing resilience & irresilience
However, the US’ strategic lead has consequences. Today, the Executive Director of the IEA, Maria van der Hoeven, comments in the FT regarding the potential of the shale boom turning to bust, should the US fail to address the bottlenecks in its energy policies and regulations. This greatly underscores that the energy system is brittle. It is irresilient. It is easily disrupted, fragile and prone to catastrophic failures. Although uncertainty cannot be removed, we need to build a more resilient energy system. At the Institute for Security and Resilience Studies (ISRS), we define resilience as the enduring power of a body or bodies for transformation, renewal and recovery with the flux of interactions and flow of events. Resilience is our ability to act decisively and learn in a world of change. Irresilience (the inverse of resilience) must not be overlooked though but is poorly assessed. What the physicist Per Bak called “self-organised criticality” too often builds up undetected irresilience in our systems. Irresilience makes our systems prone to catastrophic cascading failures.
Recent experience evidences such irresilience in energy systems. Whilst Libya produced only 2% of global oil, the importance of “sweet” crude to regional consumers is understated by that percentage. The refinery capacity fed by Libya’s sweet oil can only process low-sulphur crude oil. Unrest in Libya not only sent the price of oil up but also disproportionately disrupted supplies of oil to Europe, which consumed 85% of what Libya produced. The heavy dependence of Italy, France and Germany on Libyan sweet oil was revealed. Dependence was not limited to crude supply. Even with Saudi Arabia pumping more oil to replace the lost production capacity, Europe did not have the additional capacity to refine the more sulphurous and dense crude. Instead, the oil was shipped to newer refineries in Asia who were able to process the oil and once refined passed to European consumers.
The success of US shale oil production is poised to reveal a similar brittleness. Although vast quantities of shale oil can now flow from mid-continental US, a few major supply barriers are now evident. Shale oil is sweet oil. US refinery capacity is for heavier more sulphurous oil. It is also concentrated on the coast for imports. Moreover, the legislative legacy of the 1970s energy crises means that exporting shale oil needs US presidential ascent under the Export Administration Act of 1979. To build on the successful production of US shale oil will require improved transportation infrastructure, refinery capacity for sweeter oil and changed legislation. If the US is to maintain a strategic advantage and benefit from the shale boom, it needs to welcome options for overcoming legacy energy bottlenecks. As Maria van der Hoeven suggests, failure to do so is already making the value of lighter oil relative to heavier oil collapse. This is a perhaps a lead indicator for wider irresilience in a system.
In our forthcoming publication, entitled Resource Resilience, ISRS examine the complex and interacting energy system through an assessment of the geo-strategic, economic and environmental implications of competing resource use. We posit that a major re-think of the complexity and risk management tools are needed to better navigate through the energy crisis and enable a more resilient model. In a networked world, crises continually test for resilience. Leaders need to show vision and stimulate innovation in tackling irresilience. The US is not alone in learning how to strengthen the energy system’s resilience. Partnerships are indeed needed if we are not to become victims of success and failure in our increasingly interdependent world-economy.