States, Markets, and Institutions

Key Lessons

• Geopolitical and liberal institutionalist accounts form the two parts of the energy literature in IPE. While the former highlights the analysis of political and security aspects of interstate energy relations, the latter gives primacy to transnational processes, markets, and institutions.
• IPE demonstrates how political structures and interactions shape energy markets. It reveals the hidden interests behind particular energy programs and how specific actions skew the world’s energy wealth concentration. It can also show how actors exclude others from energy decision-making and the political, contested nature of policy implementation.
• Within the theoretical traditions in IPE, Mercantilists would assume that access to or control over energy resources is a currency of power, and lack of control is a sign of vulnerability.
• For liberals, there is nothing special about energy. The ‘invisible hand’ of the market will manage the energy sector too and ultimately benefit all.
• Marxists would argue that, in energy markets, primary resource supplying countries receive a marginal share of the returns that multinational energy firms garner from the exploitation of resources.
• Sound energy policy should be broader in scope than just fuel and power policy but should focus squarely on end-use services.
• The rise of OPEC and the first oil shock questioned the claim that peripheral countries (primary goods producers) are locked in a never-ending cycle of dependency. It shifted attention to oil-exporting countries in the Middle East and their relations with consumer states and international oil companies.
• The oil crisis of 1973 also stimulated research on commodity cartels and the conditions under which producer associations might overcome collective action problems.
• The resource curse thesis holds that the abundance of natural resources is correlated with poor economic performance, low levels of democracy, and civil war.
• The interplay between energy and foreign policies of major consumer countries such as the US, including the alleged link between oil and US participation in wars, has received considerable scholarly attention.
• Compared to other traditional areas of IPE, the energy sector lacks global institutions comparable to, for example, the WTO for trade or the IMF for finance.
• National political institutional structures for energy innovations can fall into four quadrants: social corporatist, state corporatist, liberal pluralist, and state nation.
• Much of the IPE research on privatisation and market liberalisation has investigated different models of electricity or utility restructuring. Utilities in countries across the world have experimented with new ownership models and abandoned the convention that infrastructure services should be the exclusive domain of the state.