A real energy market

Everyone “obsesses” about energy security these days – whether it is America’s concern that its dependence on specifically Arab oil is politically unsafe, or commercial fears of India and China in relying on so much imported energy to fuel their huge growing economies, or the wider worry about the climatic risk of fossil fuels.

In these circumstances, it is very tempting for governments to say energy security is too important to be left to the market. That has been the attitude of India and China in instructing their state oil companies to scramble harder for foreign reserves and of several continental European governments in building up and protecting their energy companies as national champions. Politicians cannot just walk away if there is any real risk of the lights going off. Nor can their approach to energy be purely laisser faire, or bruler, because of atmospheric pollution. But here are three ways in which the market or its mechanisms can increase energy security.

Financial Times