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1. Strategic Oil Stocks and Security of Supply

Author:
Giacomo Luciani and François-Loïc Henry
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Holding strategic oil stocks is at first sight an obvious tool to address potential disturbances in supplies. Rationally defining the desirable size of stocks and designing rules for their predictable use is an elusive task, however. A key conceptual difficulty arises in the distinction between commercial and strategic stocks, because a physical shortfall in the oil supply will inevitably lead to an increase in prices. But if strategic stocks are utilised when prices increase they become indistinguishable from commercial stocks. This paper reviews the legislation in force in the US and the EU on the use of strategic oil stocks as well as the emergency response systems of the International Energy Agency. It finds that such measures have been activated rarely and in dubious circumstances. Alternative approaches are proposed consisting of encouraging companies and major consumers to hold larger stocks and seeking a cooperative agreement with oil-producing countries for mutually beneficial stock management.
Topic:
Security, Energy Policy, Markets, and Oil
Political Geography:
United States and Europe

2. Armed Conflicts and Security of Oil and Gas Supplies

Author:
Giacomo Luciani
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The paper offers a systematic analysis of the impact of international or civil wars and violent non-state groups on global oil and gas supplies. Statistical evidence points to the fact that international wars are becoming increasingly rare, while civil wars remain frequent. The paper discusses the cases of the Iraq-Iran war and the Iraqi invasion of Kuwait, showing the limits to the damage that belligerents were able to inflict on oil installations and illustrating how the world was able to compensate for this damage. The Iraqi insurgency following international intervention to replace the Saddam Hussein regime is discussed together with other cases of civil wars in Nigeria, Angola and Sudan. The analysis supports the conclusion that oil and gas installations appear to be much more resilient to armed conflict than is normally acknowledged. History shows that civil wars have caused limited damage to existing installations, but they have hindered the desired investment in new development and attainment of target production levels. However, it is very obvious that government's inability to overcome or reabsorb violent opposition discourages international oil company investment even if the violence does not affect the areas around oil and gas installations.
Topic:
Security, Civil War, Oil, Insurgency, Natural Resources, and Infrastructure
Political Geography:
Kuwait and Nigeria

3. The Functioning of the International Oil Markets and its Security Implications

Author:
Giacomo Luciani
Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The paper discusses the link between security of oil supplies and the functioning of international oil markets. It is argued that wide and frequent variations in price are in themselves a source of insecurity for individual consumers and national economies alike. Furthermore, the impossibility of predicting future prices discourages investment and increases the fragility of the system. The paper puts forward several policy proposals to reduce excessive price fluctuations and improve security of supply at reliable prices.
Topic:
Security, Economics, Markets, and Oil
Political Geography:
North America