Insecurity of petroleum supplies and external effect: the case of security storage

The public intervention in the domain of security of petroleum supplies is in general justified in the literature by the existence of external effects linked with the phenomenon of insecurity of supplies. This work proposes to analyse in detail the validity of this justification and its implication in terms of energy policy recommendations. The components of the insecurity cost is analyzed in the first part. Two components are retained: the macro-economical effects of insecurity and the monopsony cost. The study of the macro-economical component of insecurity uses a disequilibrium economy-type approach. On the basis of a modeling of the macro-economical effects of insecurity on a conventionalized economy, a relation is evidenced between rupture probability and level of usefulness. This model is applied to 4 European Union countries and the effects of supplies insecurity is measured for each of them. For the monopsony component of supplies insecurity, the additional cost generated by insecurity in relation with the monopsony situation is analyzed. A numerical analysis illustrates this analysis. Then, the relevance of the monopsony concept in the description of the situation of petroleum consuming economies is questioned. The analysis of the US case leads to reject the existence of a petroleum monopsony made of the USA alone and to favour the definition of a monopsony made of the IEA member countries. Then, the analysis of the insecurity cost is made using the external cost notion. This study allows to settle the status of the macro-economical component: there effectively exists a macro-economical cost of insecurity but this cost cannot be considered as external. This result is interesting because many analyses justify the public intervention using the external cost property of the macro-economical effects. On the contrary, the monopsony component can be unambiguously identified as being at the origin of a pecuniary external cost. The insecurity of supplies can be defined as the source of a relevant external pecuniary effect. In the second part, the tools allowing to internalize the external effect generated by the monopsony component of the petroleum supplies insecurity are analyzed. After a recall of the classical internalization procedures (regulation, taxes and rights market) and of their theoretical bases, the internalization problem of the external effect 'insecurity of petroleum supplies' is considered. After an overview of the most frequently used policies in IEA member states (quotas, taxes, stocks), a parallel is established between these instruments and the classical internalization tools. The superiority of storage procedures is evidenced and is similar to the creation of a security rights market, analogous in its operation and efficiency properties to a pollution rights market. The superiority of the storage, which can be considered as the best instrument of collective comfort, allowing the internalization of the external effect generated by the insecurity of petroleum supplies, can lead to two particular problems which are analyzed in the next two chapters. The first problem concerns the co-existence of security stocks with commercial stocks and their possible interactions. The presentation of 3 theoretical models stresses on the complexity of the relations between these two kinds of stocks and allows to define some behaviour rules of the public power in the domain of security storage. More precisely, it is shown that, under some hypotheses, the variable influencing the different actors that can make stocks (commercial or security) is the global volume of the stocks. The second problem raised by the building up of security stocks is the international impact of stock building. This problem is treated using the transposition of a model analyzing the protection behaviours against a pollution-type external effect and allows to make some proposals about the stock levels depending on whether a cooperative behaviour is adopted or not. The use of games theory concepts allows to study the strategic behaviour choices of two countries submitted to a supply insecurity. This analysis demonstrates the superiority of cooperative behaviours with respect to the collective comfort and the necessity of a supra-national agency allowing to avoid the deviant clandestine passenger-type behaviours. (J.S.)