Energy security was a priority of the Bush Administration in 2001. In a larger context, global oil security is a major concern of the world, the United States in particular. Oil security is not about depleting reserves and having continuous supply to cover demand, but the real issue is the oil costs. International Oil Security involves two things: (1) oil producers control the supply and price of the commodity, and (2) volatile oil price creates have disruptive effects on macroeconomic situations. In the 1970s the downtrend and the inflation of industrialized economies were the results of oil price shocks.
These price shocks were mostly caused by unanticipated and drastic changes in supply, demand, and inventory which were all destabilizing. Since the late 1990s OPEC controls the global oil market because it owns 45% of oil reserves and its global output share could double in the next decade. The oil market is a volatile one. When supplies are low, prices go up to meet the demand. A shock comes when there is big shift in the supply that send prices soaring. Such big swings may bring disastrous effects on the macroeconomic equation. The oil businessmen may cushion their financial risks without considering the oil-intensive component of the economy. The case of the US shows that:
(1) effects on the US depends on its consumption of oil and not on its importation of oil, (2) it would be more expensive to increase its own supply and reduce its consumption, and (3) its military presence in the Middle East has nothing to do with oil imports. The Bush Administration’s thrust is to increase domestic oil production and lessen its reliance on oil imports, develop more efficient energy utilization and seek alternative and renewable energy resources. Legislations providing tax breaks and converting ANWR for oil exploration and production were passed.
Still, increasing output will reduce the magnitude of oil shocks slightly by keeping the prices down and decreasing the intense effects of oil on the economy. ANWR appears to be a bad idea, primarily because of the social and environmental impact it carries. From a macroeconomic view, decreasing the oil intensity of its economy is paramount to ensuring its energy security. Cost-effective conservation measures and regulated minimal adjustments have insignificant effect on petroleum prices. It would take stronger policies to complement conservation and efficient utilization to boost its oil security efforts:
(1) better management of oil reserves, (2) protection for the low-income sector who is most sensitive to price swings, (3) exploring other alternative fuel sources, (4) providing for energy use that ride the tide of price changes, and (5) developing non-fossil based fuels. In the final count, energy security can be had depending on the high costs of oil and the critical research and development needed.