Beyond Security of Demand: Managing Social, Political, and Economic Path Dependence in Oil Exporting Countries

While energy security – conventionally emphasizing the supply side – is in itself a contested concept, ‘security of demand’ which is underlined particularly by energy exporting countries, is additionally problematic. At first glance, there is nothing special about a country’s economic export dependency – no matter what the commodity, be it oil, cotton or apples, the economic insecurity of the exporter is best captured by its share of GDP. So what is special about energy, which makes demand security in this sector distinct from the general economic security of a state? The traditional definition of Security of supply: “adequate, reliable supplies of energy at reasonable prices in ways that do not jeopardize major national values and objectives” (Yergin 1988), can be paraphrased to cover Security of demand: “adequate, reliable demand for developed energy resources at reasonable prices that do not jeopardize national welfare, values and objectives”. This suggests that the core of security of demand is profit. As oil is sold in an open 24-7 traded market, the price is the same for all, with some variations across qualities of crude and transportation costs. The profit varies with differences in production costs and taxes. The chapter will start out with a short discussion of the variation in profitability. As the title indicates, the aim of this chapter is to go beyond this narrow understanding of security of demand and focus on the broader implications from countries dependency on export of oil and gas. The traditional approach to this question is found in the literature discussing the various aspects of the so-called resource curse. The main aspects of this literature focus on the immediate effects of oil exports on the exchange rates and monetary policies of oil and gas exporters, and indirect effects of the countries’ fiscal policy. Also political aspects of the implications for deficiencies in public administration and the obstacles to democratization due to the fact that the state is economically independent of the public, so-called rentier states. The chapter will include a presentation of some political and macro-economic indicators for the twenty largest oil and gas exporters, in order to describe these consequences on their economies and political system from the dependency on oil and gas exports. However, we will go beyond this conventional approach by drawing on three literatures: the political institutionalist approach, emphasizing path dependencies, as well as transition studies, with its concept of lock-ins, and finally, the ongoing material turn in energy research within the social sciences (attempting to theorize the causal impacts of the ‘materialities’ of different fuels). A detailed comparative study of four countries, Norway, Russia, Saudi-Arabia and Venezuela constitutes the main empirical part of the chapter. The aim is to compare the economic, political, and social implications of the export dependency, and suggest possible explanations for the variation among the four countries.