Managing energy security : the analysis of interfuel substitution and international energy trade

Energy security and affordability are major concerns in the coming winter as Germany seeks substitutes for Russia’s energy supplies. We highlight the role of energy transition on its exposure to energy price shocks and its failure to include security considerations in its trading arrangements. We analyze the global trade of coal, oil, and natural gas to track 1) interfuel switching, and 2) cross-country variance in security of supply (i.e., import concentration). We examine how energy security and affordability can be improved by domestic production, interfuel demand allocation, and trade balance. We provide policy recommendations on coordination in 1) domestic energy production, 2) energy mix, and 3) new imports by destination, emphasizing the role of multinational coordination.