International Indexes for Energy Security Risk

Daniel E. KleinChristopher D. Russell

Twenty-First Strategies, LLC

Stephen D. Eule Institute for 21st Century Energy, U.S. Chamber of Commerce

USAEE/IAEE 30th North American ConferenceWashington DCOctober 10, 2011

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Going beyond the U.S. ESRI

Energy Security is both local and global Several U.S. ESRI metrics are int’l, with global values Int’l events affect several other metrics

Over time, a shrinking U.S. share in world energy markets Smaller share of world production, esp. oil Smaller share of world consumption, driven by faster

growth elsewhere and energy efficiency here Increasingly, global market conditions are less influenced

by U.S. activity Communicating energy security risks internationally

helps U.S. as well Energy efficiency anywhere create benefits everywhere Ditto with shale gas & renewables

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Objectives of International ESRI efforts

Build on the extensive efforts undertaken for the U.S. Index of Energy Security Risk Concepts and Methodologies Data and analyses

Extend ESRI logic to other nations Particularly OECD nations As feasible, BRIC nations and others Understand trends in absolute and relative terms

Create additional products and publications for U.S. & international fora

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Need to work within the realm of the possible Ideally, the U.S. ESRI methodologies could be extended to

other countries Richly detailed U.S. data, complete over long time spans But … int’l data are a mixed bag

U.S. vs. OECD nations vs. rest of world Gaps in the historical data, esp. in earlier years Price & expenditure data particularly weak

Forecasts far less detailed than U.S. in EIA’s AEO Compromises are sometimes needed between what’s

theoretically ideal and what’s realistically achievable Must work within available data: transparent, credible, etc. Historical back to 1980, vs. 1970 for U.S. ESRI 20-30 metrics developed or under development. Most have

data for all countries; some are OECD-only No forecast component, at least for now

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Various products under development

1. Int’l Energy Security Risk Index (mainly OECD countries) A fuller set of security and risk metrics considerations Many metrics exist for all countries, but others (esp. price &

cost) are more limited, generally to OECD countries Hence, this index has the most depth, but lesser

geographic coverage.2. Fuel Import Exposure (all countries)

Net imports as % of fuel consumption Do this separately for oil, natural gas, & coal, & also total

net fuel imports as % of total energy consumed Freedom and diversity trends are also incorporated For each country, absolute & relative to OECD trend

3. Energy Efficiency Trends (all countries)

Energy, transportation, and CO2 intensities For each country, absolute & relative to OECD trend

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Charting relative to OECD trends (1980=100) shows countries’ absolute & relative trends

1. Petroleum Fuels, Net Imports as Percent of

Consumption

2. Petroleum

Production, Freedom &

Diversity Trends

3. PetroleumNet Import Exposure,

Freedom & Diversity Adjusted

Net Oil Imports as % of Consumption, 1980-2010

0%

10%

20%

30%

40%

50%

60%

70%

UnitedStates

OECD

Net

Imp

orts

% o

f C

on

su

mp

tio

n

Freedom & Diversity of World Oil Production, 1980-2010

50

60

70

80

90

100

110

120ProductionFreedomTrend

ProductionDiversityTrend

Composite:Freedom XDiversity

Oil

Pro

du

cti

on

Tren

ds,

19

80=

10

0

Net Oil Import Exposure, Freedom & Diversity Adjusted

0102030405060708090

100110

UnitedStates

OECD

Oil

Im

po

rt

Exp

osu

re D

iversit

y,

OE

CD

1980 =

100

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Interesting data and conceptual issues emerge

Treating fungibility in fuel markets Differ by fuel? Differ over time? Substitution across fuels?

Measuring “security” in global commodity markets Importance of supply diversity Importance of economic/political freedom Global factors over time, or country-specific?

Defining a reference basket of countries OECD data are better than worldwide data But since 1980, countries have split up and merged Different years of entry into OECD Need to define “OECD-ish” boundaries that are

geographically stable over time

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Next steps

Completing data collection and assembly Complete metrics & develop weightings Int’l ESRI by year-end Other products before and/or after A first word. Not a last word.

As with U.S. ESRI, a two-way communication Reviewers, advisors, & readers have an important role Value in engaging in a dialogue Feedback lets us revise and improve the Index

Expectations of annual updates and extensions

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Thank You!

www.energyxxi.org/www.energyxxi.org/