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What Is Energy Diversification?

By Kenneth W. Michael Wills
Updated May 16, 2024
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Energy diversification refers to a nation using multiple sources of energy to run its economy and public services, eliminating dependence on any one source of energy. Such diversification can mean both renewable and non-renewable energy sources as well as multiple carriers, though the terminology increasingly leans more toward investment in renewable energy. Objectively, energy diversification is a strategy deployed to bolster both economic and physical security, thereby mitigating the risk of manipulation from foreign entities that may have a monopoly on specific non-renewable energy sources, such as oil. Furthermore, renewable energy is an important focus in energy diversification as well due to the potential of scarcity associated with non-renewable sources, which in itself potentially creates internal security threats through economic uncertainty.

One major strategy used by governments globally is to secure contracts with multiple energy carriers from all over the world and structure those contracts so that they are scalable. Mainly, such energy sources refer to non-renewable energy like oil or hydrocarbons. Scalability refers to the potential to quickly increase the scale of delivery in the event that the nation needs to account for a sudden decrease in supply from another carrier. With multiple, scalable contracts a nation is in a better bargaining position in international relations, if those contracts are strategically negotiated.

Another aspect of energy diversification includes increasing domestic production of and exploration for non-renewable energy sources when possible, although most nations will seek to conserve those resources to any extent possible. Due to this strategic stance, consensus is shifting toward investment in and domestic production of renewable energy sources. Potential leveraging of non-renewable sources can help nations achieve true energy diversification, energy independence and a measure of economic and physical security. Sustainability is a major concern of this process; therefore, investment and research in renewable energy takes time and expertise. While such knowledge grows through productive efforts, other diversification initiatives are intensively pursued as previously mentioned.

Pursuing these strategies is crucial, because the global economy and all nations that comprise the global community, for the most part, rely on fossil fuels to keep their economies functioning smoothly. Diversification of those sources helps to ensure the economy remains productive and viable even in the event of adversity or conflict with other nations to include carriers of these energy sources. Adding to the bid for energy diversification, consumption strategies are taken into account as well, to bring down demand levels. When nations consume less energy, this means they simply do not have to purchase or produce as much energy, which means a diminished reliance on foreign imports.

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Discussion Comments
By Logicfest — On Jun 30, 2014

@Markerrag -- oil prices aren't dropping (and and gas prices are doing up as a result) because U.S. oil markets are influenced by foreign factors. Prices are set according to an international standard, so when production shuts down in troubled areas like Iraq we all feel the pinch.

If U.S. oil markets operated independently of the international one, then perhaps gas prices would drop.

By Markerrag — On Jun 29, 2014

@Vincenzo -- we're not nearly as reliant on foreign oil as we used to be. Due to improvements in technology, the discovery of more oil, etc., we now produce almost as much as we need.

And we are energy diverse in the United States. For example, electricity plants are powered by domestic coal, domestic natural gas and domestic gasoline. And let's not forget about nuclear power. Sure, we need to find alternatives to fossil fuels but we will get there and we are fine in the meantime.

Here's what I don't understand about the United States' oil supply. If we are producing almost all of the oil we need, why aren't we seeing drops in oil prices?

By Vincenzo — On Jun 28, 2014

That's exactly what we need to see more of here in the United States. One of the biggest problems we have is an outright reliance on foreign oil. Who cares how long oil will last? As long as we are beholding to other countries for the fuel we need, we will have trouble.

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