Study Notes

Energy Trade

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 2 Aug 2017

The divergent distribution of energy production and energy consumption leads to a need for energy trade as it is transported from areas of energy surplus to locations of energy deficit.

Patterns of global energy trade, which are essentially the trade of fossil fuels, are determined by five key variables:

  • the ease of transporting the fuel source (there are multiple bulk oil carriers)
  • the economics of sourcing energy from different global locations
  • the operations of global energy TNCs and where they have built up production and processing centres, such as oil refineries
  • geopolitical issues concerning the countries seeking to buy and sell
  • strategic considerations: nations seeking energy security and avoiding over-reliance on one or two foreign suppliers

The most traded fossil fuel is oil as it has the largest demand, is the easiest to transport over long distances, by ship or pipeline, and is the easiest to store. Countries in the Middle East together with Russia and Venezuela are the largest oil exporters. The USA and China, despite being large domestic oil producers, are also the two largest importers of oil, followed by Japan and India, indicating the scale of their demand.

The solid and bulky nature of coal makes it less easy to transport, so consumption tends to match domestic supply where available. Germany and the UK are notable coal importers as their electricity generation still depends on coal-fired power stations. Although LNG technology has improved, the trade of gas is more limited than oil and is still largely driven by the availability of pipelines. Russia’s geographically favourable location, with pipeline access to Europe and Asia, helps it stand out as the world’s largest gas exporter. Japan, Germany and Italy are large importers of gas.

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