Exogenous shocks and governing energy security
Diriöz, Ali Oğuz
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The research examines how governments maintain energy security when faced with exogenous shocks. The main focus of inquiry examines the relative influence of markets vs. geopolitics in the area of energy security using the comparative case studies of Turkey, France, and Netherlands, which are OECD economies and NATO members, but feature diverse settings and contexts as well as different energy mixes, geographies, and demographics. The research then inquires how these countries’ respective governments responded to four exogenous shocks: a) 2003 invasion of Iraq and ensuing oil price hike; b) Russia-Ukraine natural gas crisis of 2005/6; c) 2008 world economic crisis and ensuing extreme oil price fluctuations; d) 2011 Fukushima nuclear meltdown. It is argued that governments operate within two distinct decision time horizons to maintain energy security. The concept of “Term Structure Approach to Energy Security” is introduced, which refers to government’s capacity to respond to exogenous shocks within different time horizons. In the short term, governments cannot respond to vulnerabilities with optimum efficacy, so they seek palliative solutions. In the long term, governments develop a greater capacity to the area of energy security, to minimize vulnerabilities. Thus, governments implement different strategies associated with different term structures in responding to exogenous shocks to their energy security. Geopolitics and external adjustment (EGA) observed tend to be of long term, and set the structure within which markets operate. Therefore, system level influences are more observable in maintaining energy security.