Speech De Palacio: "De veilige toevoer van energie naar de Europese Unie - Geopolitieke overwegingen" (en) - Hoofdinhoud

Loyola de Palacio

Vice-President of the European Commission, Commissioner for Transport and Energy

EU Energy Supply Security and Geopolitics

European Energy Foundation
Brussels, 29 September 2004

Introduction

Dr Linkohr,

Ladies and Gentlemen

Thank you for inviting me to join you tonight.

This evening's debate is a fitting follow-up to today's discussion at the European Policy Centre Dialogue.

I found this afternoon's discussion very stimulating. It brought fresh light to a challenging topic. It also revisited some of the political themes which have kept me busy for the last five years, such as:

The need for coordination among Member States' energy policies

• The value of a broad and balanced approach to energy supply and keeping all options open
• The importance of continuous dialogue with our energy partners, no matter what the prevailing market conditions are,
• And the urgency of agreeing collaborative mechanisms to address global market weaknesses.

In my view, the security of our energy supply will depend more and more on the ability of the EU to function as a strong and cohesive player in the geopolitical arena. The framework for energy supply is changing, and we need to evolve political and geopolitical structures in response.

To explain what I mean I will

• First, describe how I think the politics for energy supply are changing, and
• Second, explore how the EU can use energy policies to increase its international influence and protect its energy consumers from geopolitical tensions.

Global energy markets increase vulnerability to geopolitical risk

Back in 1973 and the 80's, the world was shocked into developing national and international energy policies to reduce the risk of disruption due to geopolitical instability. Since then, we have benefited, in the developed world, from more or less uninterrupted, and generally cheap, energy supplies. But now there is an emerging sense that these are under threat. What has changed to make us so sensitive once more to the geopolitical risk? First, there is unprecedented growth in energy demand across the globe.For too long, we have largely disregarded the implications for energy supply of high economic growth in countries such as China and India. In fact, the global energy system could be transformed if countries such as China and India reach the economic growth they are aiming at. Current plans will require a vast amount of energy.

This is the first change that is taking place in energy geopolitics: energy security is not only about relations with oil and gas producers, but also with other consumers.

The second reason for our growing concern is security of infrastructure. Higher volumes of fuel are crossing longer distances. Safe transportation faces multiple threats - terrorism, wear and tear, lack of capacity, piracy, political rivalries. To maintain and pay for safe infrastructure, massive amounts of private investment are necessary.

In their Energy Investment Outlook last year, the IEA estimated that, to assure its energy supplies, the EU will need over 2 thousand billion dollars worth of investment in the energy sector over the next thirty years. Over the same period, the global oil market will need some 3 thousand billion dollars of investment. The bulk of this is only to maintain capacity. These volumes of investment require adequate economic and political security.

Is today's world really more turbulent than over the last three decades? In many ways it is not, but the sense of insecurity is high. And for today's media-driven world, perceptions are as important as reality. This creates a second new challenge for energy security policy. Not only we need to bring real calm, but also a sense of calm and confidence in international relationships.

The third change is the growing evidence that energy markets do not function accordingly to conventional economic doctrine.History tells us that international events do not evolve as you might anticipate. The Iran-Iraq war had a relatively limited impact on prices and supply. Whilst the recent emergence of Iraq as a liberated state does not seem to have reassured markets as might have been thought. Experience also tells us that energy markets appear to be unusually sensitive to the unexpected events. This partly explains why oil prices jump at the mention of strikes in Nigeria, elections in Venezuela, cyclones in the Caribbean.We are also discovering the pernicious influence that excessive speculation can have on energy prices. Speculation has always been with us. But what is new is the ability of a core of money-makers to disrupt markets on such a dramatic and lasting scale.

The lesson is clear. Energy economics go much further than seeking to balance supply and demand. Geopolitical policies must catch up with the new reality. Our third new pressure is to give energy supply policies the priority they deserve in international relations.

Imperative for EU to develop internal and external defence mechanisms

What are the implications for the EU?

In my view, a two-pronged approach is needed. We need policies which better equip us to deal with the risks and turbulence which affect global energy markets. And we must also develop structures and mechanisms to reduce the impact of global market tensions at home. But which policies will be most effective?

Allow me to recall my speech earlier today at the EPC Dialogue. There, I argued in favour of

• Greater energy policy coordination among Member States
• A more broad based approach to energy policy
• Strengthening the link between international relations and energy policy
• And emulating the EU dialogue with Russia with producer countries, with other partners and consumer countries.

Let us not forget that the EU already has the tools to operate as a single player in global energy markets - a single market and a single currency. By using these tools effectively, the EU could increase its power to influence external events, and ultimately build up mechanisms to protect its own markets and consumers.

For almost five years, I have sought to develop an approach to energy on behalf of the EU which would improve collaboration among Member States. I have introduced legislation to increase standards in efficiency and to encourage energy diversification in all Member States. And I have taken steps to build up the presence of the EU on the international energy stage. I believe that our efforts - by which I mean not only my own but also those of many others, including many of you and my colleagues in Member States - are starting to bear fruit. The EU is probably in a better position than ever before to cope with the recent doubling of oil prices.

But could we do even better?

This is a challenge for my successor. Some of the ground work has already been done.

Conclusion

As politicians and decision makers, it is our task to make sure that we continue to build awareness of the importance of secure energy supplies to Europe's wider security and to develop a political response. This means establishing strategies and mechanisms which build on our strengths and tackle our weaknesses. It means enhancing our energy supply structures at home, and cultivating energy relations abroad.

Today's discussions have been most timely and enlightening. Let us keep them alive in the weeks and months to come.

Thank you, Ladies and Gentlemen, for your attention.