International Energy Cooperation Among Energy Consuming Countries: An Analysis Through Game Theory

The International Energy Political System is in a state of anarchy. There is noworld government dictating the distribution of scarce and unevenly located energyresources especially oil, so the energy consuming countries, whose oil needs exceedtheir own supply capacities and have to depend on imported oil, must "self-help" inthe pursuit of energy security. As the oil demands in some developing countriesincrease, the competition to secure scarce oil resources is growing more and moreintense among the energy counsuming countries. In many cases, however, energycooperation among the consuming countries offers a better long-term path to energysecurity. Understanding why and how international energy cooperation occurs in ananarchic world is crucial to developing strategies to promote future cooperation.Neo-realists and Neo-institutionalists argue that international energy cooperation canonly be explained by the existence of an external mechanism—the U.S. hegemonyfor the former and the International Energy Agency for the latter. However, bothparadigms offer little insight into why energy cooperation occurs among the countriesof approximately equal power, no external mechanisms exist, and how it can berealized. This dissertation explores the reason why this type of international energycooperation occurs and the conditions for its realization.In this study, a game theoretical approach is employed to model different strategicinteractions between two energy consuming countries of approximately equal power.For each game, a specific historical case study is used to further explore the dynamicsof such interactions. Based on this, the "Energy Game Autonomous CooperationModel" is created to show that under a condition of complete information, the twocountries can realize cooperation based on their own utility calculation. In addition,three matching strategies, i.e., "economic hostage", "reciprocity", and "issuelinkages" influence the cooperative equilibrium outcome. To verify the model, theinteractions between China and India, and between China and Japan over oil and gasresources are used as two case studies. The application of the model shows thatenergy cooperative equilibrium between China and India is a direct outcome of thethree matching strategies of the "Energy Game Autonomous Coopertation Model",whereas energy autonomous non-cooperative equilibrium between China and Japan isprimarily due to the negative effects of "issue linkages" strong enough to overwhelmthe effects of the other two strategies.