Globalization is the emerging incorporation of economies, as well as societies throughout the globe. Currently, almost every industry is experiencing globalization either directly or indirectly. A novel international energy economy that will create a rise in demand and supply and thus encourage the different regions in the globe to rely on each other is developing. A global widespread energetic reliance on energy resources, as well as networks is increasing in the international economy.
Economists have estimated that almost $22 trillion is needed to invest in the distribution of infrastructure, which would meet the expected demand up to 2030. The mobilization of the required resources and other factors are posing challenges to the future of the energy industry. This paper will discuss the challenges that face the energy industry, which is my future career, due to globalization.
Problems of Globalization in the future of the Energy Industry
One of the main problems that globalization has caused to the energy industry is energy security. Energy security refers to the availability of sufficient, cheap, and dependable quantity of energy. In addition, energy security has a close association with geopolitics, as well as regional security demands (Bradshaw 275-290) because sufficient, cheap, and dependable quantity of energy is an essential component of any contemporary community. The challenges in energy security come in a number of ways.
The economy of any nation relies on the abundant and affordable distribution of fossil fuels (Amineh and Guang 78). Moreover, the spatial formation of the international economy coupled with its elements and subsidiary organizations especially the transport sector only become a reality if there is a dependable source of low-cost energy.
Nevertheless, the nature of fossil fuel capitalism runs back to the industrialization epoch during its integration in the established market economies (O’Loughlin and Staeheli 126). Researchers have underscored the fact that the exhaustion of hydrocarbons is always accompanied by externalities, which come in the nature of effluence and environmental dilapidation, a price that is rarely paid by consumers or producers.
This price is left in a remarkably low condition primarily because of its pivotal role in economic development. This economic reluctance has been crucial in maintaining the stability of energy services, but it is currently generating an unpredictable danger to the planetary ecosystem (Bradshaw 275-290).
For decades, industries from both capitalist and socialist backgrounds have been overlooking the abundant and cheap distribution of energy majorly due to the consumption of the ever-rising quantity of energy mainly in the nature of fossil fuels. As the effects of industrialization stretched because of imperialism, and currently through globalization, so did fuel dependence. Nonetheless, several factors are challenging the existence of fossil capitalism (Preda 170-176).
The initial factors associate with the results of alteration of ownership as well as regulation of energy resources. The popular nationalization of the energy trade, as well as the formulation of the Organization of Petroleum Exporting Countries (OPEC) terminated the domination of the Organization of Economic Cooperation and Development (OECD) and the International Oil Companies (IOCs) (Bradshaw 275-290). This move transformed the balance of power between countries that exported oil and those that were importing the commodity.
Although many individuals have the perception that OPEC governs the oil prices in the world, the fact is that international market has a flimsy and instable equilibrium between supply and demand. The fact that the oil industry has been modified to a profit-oriented industry makes it difficult since both the speculation and the rising corporeal demand for energy are liable for inflation in the current oil prices (O’Loughlin and Staeheli 132).
In the past years, the IOCs governed international oil and had a license for most of the reserves; however, this ceased when the National Oil Companies took a share of 52 per cent for international energy production and owned two thirds of the reserves (Preda 170-176).
This has involuntarily forced IOCs to settle on risky environments such as the water offshore, and a consequence of this action is the recent oil accident witnessed in Mexico. For countries with abundant energy supply, dictating the payments produced by their energy exports is a main concern (Bradshaw 275-290). This aspect has made nations such as Russia to utilize their energy affluence in influencing the formulation of foreign policy targets.
In retaliation, countries that import oil have criticized this action naming it resource nationalism. Several people have agreed that the evolving tension between oil-exporting and oil-importing countries in the ever-escalating demand for energy will create an era of ‘resource wars’. In the era ‘resource wars’, nations that consume energy will start fighting for domination over the energy-producers. This depicts a harsh future on the relationship amongst countries if such sentiments are not rectified soon (Preda 170-176).
Anthropogenic alterations in the climate have pressurized the relevant authorities to include the issue of carbon dioxide (CO2) discharges on their policy outlines. Energy is a focal issue when creating climate change policies because the use of hydrocarbons to distribute energy is the main source of CO2 emanations. Therefore, climate change policy must minimize the combustion of fossil fuels to provide energy. The policy must assert the need to establish a new low-carbon energy source (Amineh and Guang 108).
This quest has led to another energy paradigm of establishing an energy policy with security as well as minimal effect on the climate, which leaves consumers with only a single option of being optimistic that they do not retain an affordable source of energy. Furthermore, the increasing oil demands make it difficult to apply such policies because substantial investment is needed to alter the immense domination that oil has in the energy market (Bradshaw 275-290).
The sum of the quantity of hydrocarbons on earth is contemporarily the resource base. However, this quantity is not similar to the ‘verified reserve’. Verified reserve refers to the hydrocarbons that the geological study reveals, which can be recuperated from known reserves at any time of the economy. Presumably, in the future these reserves can be overexploited when the increasing demand of oil surpasses that of supply of oil. Consequently, this would lead to the end of any inexpensive source of energy (Bradshaw 275-290).
Globalization has positive and negative impacts in any sector of the economy. Likewise, in the energy industry, globalization is undeniably changing how the producers and consumers of energy interact. The expanded market created by globalization has increased demand for energy and hence a rise in the production of oil.
The increased supply implies that energy insecurity as well as a rise of CO2 emission will soon develop. If such events last, then the world will continue experiencing climate changes as well as environmental degradation. Therefore, the energy industry should formulate policies that will prevent or regulate the dangers that globalization will introduce into the industry in the future.
Amineh, Mehdi, and Yang Guang. The Globalization of Energy: China and the European Union. Netherlands: BRILL, 2010. Print
Bradshaw, Michael. “Global energy dilemmas: A geographical perspective.” The Geographical Journal 176.4 (2010): 275-290. Print.
O’Loughlin, John and, Lynn Staeheli. Globalization and Its Outcomes. New York. Guilford Press, 2004. Print.
Preda, Mihaela. “Globalization and the New Energy Challenges.” Annals of the University of Oradea, Economic Science Series 17.1 (2008): 170-176. Print.