Financial Issues Affecting Energy Security

  • Print

Last week, I gave a talk called Financial Issues Affecting Energy Security at the Advances in Energy Studies conference in Mumbai, India. The general topic of the conference was, “Energy Security and Development-The Changing Global Context.”

As I look at the situation, it seems to me that many of the crises around the world are connected to oil supply and the cost of this oil supply. If oil supply gets tighter, there is potential for these crises to get worse. In this talk, I will also show the connection of oil supply limits to some of the financial crises we see today, and to energy security. I will also show some slides on the Indian oil and coal situation, and explain some connections to world limits.

world oil supply price 1965 to 2009
Based on data from BP's 2012 Statistical Review of World Energy.

World GDP, oil consumption, and energy consumption tend to move in tandem. While the figures shown above are for the world, the same situation tends to exist for smaller groupings as well. Countries with rapid economic growth tend to use a growing amount of energy, especially oil. This is logical, because making goods and services tends to use energy. For example, growing food and transporting it using modern methods uses oil.

Another reason energy consumption and growth in GDP tend to go together is because workers who earn a salary by making goods or services can afford to buy goods and services using oil and other energy products. For example, they may be able to afford to buy a car or to go on a vacation. People who have lost their jobs have much less to spend on goods and services. This is another reason energy (and oil) consumption tends to be higher when more people have jobs–that is during periods of economic growth.

Countries with little economic growth tend to be ones with little growth in oil consumption, and in energy consumption in general.

Continue Reading

CLICK HERE to subscribe to the free weekly Best of Financial Sense Newsletter .

About Gail Tverberg

Quantcast