The spread of the novel coronavirus (COVID-19) has been a disaster for the economy, shown weaknesses in public health systems, and killed thousands people worldwide. It has also made clear how interconnected the modern world has become. Walls are futile for preventing the rapid movement of the virus around the globe.
The failure to reach agreement on production cuts at the recent OPEC+ meetings in Vienna has sent oil prices plummeting, marking a return to volatility after a reasonably calm period. This event too shows the interconnection of the world via global markets.
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The oil “war” that emerged in Vienna in March between Saudi Arabia and Russia affected oil companies and oilfield-services companies, as well as their employees, investors, and local communities. Many energy companies were already highly leveraged and not bringing in sufficient revenue, resulting in declines in market capitalization and jobs. However, there was still hope. That hope has severely eroded over just a week.
This price collapse, oil market experts warned, is different than past crashes. It is a combination of a supply glut with enormous demand loss. Thus, there is no clear precedent for how it might be addressed. The breakdown of the OPEC+ talks will likely have ongoing negative implications for the cartel and its influence. Another key impact is that prices for gasoline and other products made from oil will drop.
Despite the painful and empirical evidence that we live in an interconnected world, many still take this interdependence as an affront to national sovereignty. They hide within the rhetoric of populism and nationalism. Energy dominance is nonsense, as is energy independence.
The goal, rather, should be real energy security, including resilient economics, communities, and markets. Such a security goal requires a new approach to global energy statecraft, rooted not in boisterous language, but in staid policies and regulations that acknowledge volatility in prices and inevitable geopolitical disruptions. As the energy landscape continues to change and evolve, a pivot towards resilient security will also enable a transition to a sustainable and low-carbon future.
The volatility and uncertainty in energy markets bring an opportunity to redefine energy security for a multi-polar, ever-more connected world. Crises can foster cooperation, and an increasingly more interconnected set of energy markets could encourage a more stable, lower-carbon future.
— Writer is Fellow – Foreign Policy, Energy Security and Climate Initiative