The reliability and diversity of global reserves and supplies of oil, natural gas, and coal. Higher reliability and diversity mean a lower risk to energy security.
The exposure of the U.S. economy to unreliable and concentrated supplies of oil and natural gas and import costs (not necessarily related to the amount of imports). Higher reliability and diversity and lower costs mean a lower risk to energy security.
The magnitude of energy costs to the U.S. economy and the exposure of consumers to price shocks. Lower costs and exposure mean a lower risk to energy security.
Price & Market Volatility
The susceptibility of the U.S. economy and consumers to large swings in energy prices. Lower volatility means a lower risk to energy security.
Energy Use Intensity
Energy intensity and energy efficiency. Lower use of energy by industry to produce goods and services and by commercial and residential consumers mean a lower risk to energy security.
Electric Power Sector
The diversity and reliability of electricity generating capacity. Higher diversity and reliability mean a lower risk to energy security.
Efficiency of the auto fleet and diversity of fuels. Higher efficiency and diversity mean a lower risk to energy security.
The exposure of the U.S. economy to national and international greenhouse gas emission reduction mandates. Lower emissions of carbon dioxide from energy mean a lower risk to energy security.
Research & Development
The prospects for new advanced energy technologies and development of intellectual capital. Higher R & D investments and technical graduates mean a lower risk to energy security.
Understanding the Index of U.S. Energy Security Risk
Since the early 1970s, presidential administrations and other policymakers have made energy security a priority. Yet, policymakers have lacked a tool to regularly measure our nation's progress and thus assess the impact of policy decisions on America's energy security. Indeed, energy is still recognized today as among the top challenges to our future prosperity, national security, and way of life.
The Index, a first-of-its-kind energy risk indicator, uses quantifiable data, historical trend information, and government projections to identify the policies and other factors that contribute positively or negatively to U.S. energy security.
It provides a look at energy security retrospectively from 1970 to 2010 and prospectively from 2010 to 2035.
From this data, policymakers and energy professionals can use the Index to track shifts in U.S. energy security over time and assess potential impacts of new policies. It allows us to answer with precision and regularity the question: Is our energy security getting better or worse and, importantly, why?
Visible in the Index are effects of major world events over the past four decades, as well as harbingers of risk over the coming two decades.
To put the Index into some historical perspective, while the years 1980 and 2008 represent the years with the highest energy security risks in the series with a score of 100 and 100.9, respectively, 1991 represents the year with lowest risk with a score of 74.2.
" Forecasts suggest that as the global economy recovers, the risks to U.S. energy security outlined in the Index will approach the highs seen in 1980 and 2008 and average 94 from 2011 to 2035.
Understanding Geopolitical Risk
The Geopolitical Sub-Index measures the risks posed to U.S. energy security related to world circumstances including perceived political instability and the impact such instability could have on international energy markets.
As we have seen in the past, political revolutions, wars, embargoes, and other geopolitical events have had a tremendous impact on the price and availability of energy supplies.
Most energy sources are globally traded commodities, and resources are concentrated in a relatively small number of places. For instance, about 70 percent of proven natural gas reserves are located in the Middle East, Russia, and other former Soviet republics.
Because international disputes can quickly turn into energy problems, and vice versa, dependence on foreign countries for energy poses political and national security risks, and energy occupies a consequential role in U.S. foreign policy.
Index measures that contribute to Geopolitical risk include: security of world oil, natural gas and coal reserves, and crude oil prices.
Understanding Economic Risk
The Economic Sub-Index measures the risks posed to U.S. energy security including prices, price volatility, and the cost of energy as a share of the economy or household income.
Energy expenditures make up 7 percent of U.S. GDP and consume a significant percentage of an average American's monthly income.
Volatile prices, such as spikes in gasoline or electricity prices, have severe and negative impacts on family budgets and commerce.
Over the long term, high energy prices could diminish our national wealth and force industry to move elsewhere. Our reliance on foreign oil also has a profound effect on our nation's trade balance.
Greater energy efficiency can help reduce economic risk by lowering the impact of higher energy costs.
Metrics that contribute to Economic risks include: energy expenditure volatility, energy expenditures per household, retail electricity prices, and oil and natural gas import expenditures per GDP.
Understanding Reliability Risk
The Reliability Sub-Index measures the risks posed to U.S. energy security from potential interruptions in energy supplies.
A stable, reliable energy supply is essential for the security and prosperity of any nation.
Disruptions to energy supplies - whether natural or man-made, accidental or deliberate, and of short or long duration - entail high costs that can shock the economy and lead to higher energy costs.
They include accidents and sabotage to critical infrastructure like pipelines or power plants, weather events such as hurricanes that impact oil and gas fields, overloaded electrical grids that can cause blackouts, and the lack of refining capacity that could cause shortages.
These reliability considerations, in turn, have economic and even geopolitical consequences.
Metrics that contribute to Reliability risks include: petroleum stock levels, electricity capacity diversity, and electricity transmission line mileage.
Understanding Environmental Risk
The Environmental Sub-Index measures the risks posed to U.S. energy security by the uncertainties surrounding climate change, including climate change policy.
Carbon dioxide emissions from fossil fuels comprise about 80 percent of total gross U.S. greenhouse gas emissions, and the U.S. is still heavily reliant on them.
Climate change poses risks related both to the actual impacts of climate change and to the economic and energy market impacts of taking actions to reduce carbon dioxide emissions.
These risks and uncertainties are appropriately included as part of an assessment of energy security.
Metrics that contribute to Environmental risks include: household, commercial and industrial energy efficiency, passenger car MPG and energy-related carbon dioxide emissions.
Roll over darker areas on the graph to see additional information about selected years.
The oil crises of the 1970s were a wakeup call to U.S. energy security concerns. In particular, the Arab oil embargo and the Iranian revolution sparked turmoil in world oil markets that drove up oil prices to unprecedented levels.
These events are reflected in the Index, which rose from a level of 77.6 in 1970 to 100 in 1980, the second highest level of energy security risk in the historical record.
In the 1970s, crude oil prices quadrupled in real terms. Because oil played a much larger role in the U.S. energy economy in the 1970s than it does today, the oil shocks rippled strongly throughout the economy.
The 1970s were a busy time for energy policymakers. Eight major pieces of energy legislation were enacted into law covering a broad array of energy issues.
In 1973, President Nixon launched "Project Independence," an initiative designed to achieve U.S. self-reliance in energy by 1980. Presidents Ford and Carter also proposed energy plans of their own, with President Carter likening the battle for greater energy security to the "moral equivalent of war."
The 1970s: Geopolitical Trends
The two oil crises of the 1970s - the Arab oil embargo and the Iranian revolution - highlighted the vulnerability of the U.S. economy to geopolitical events, especially in oil-producing regions of the world. The Soviet Union invasion of Afghanistan in 1979 added to regional tensions.
Although at the beginning of the decade the United States accounted for over 20% of the world's total oil production, more foreign imports were needed to offset declining domestic oil production throughout the 1970s.
The 1973 oil embargo by Arab members of the Organization of Petroleum Exporting Countries (OPEC) used the economic power of oil for political gains by targeting countries (primarily the United States) that were supplying equipment to the Israeli military during the Yom Kippur War.
President Carter called the oil crisis of 1979-80 the "moral equivalent of war," and issued the Carter Doctrine, which declared that U.S. oil interests in the Persian Gulf were vital to national security.
The 1970s: Economic Trends
The Arab oil embargo and the Iranian revolution caused tremendous volatility in oil prices and costs to consumers. Crude oil prices rose from $4 per barrel at the beginning of the 1970s to more than $12 per barrel during the Arab oil embargo and then to more than $30 per barrel during the Iranian crisis. For the first time, U.S. gasoline prices at the pump rose to more than $1 per gallon.
The spike in fuel prices also hit consumers with higher electricity bills. In the 1970s, oil-fired generators accounted for about 15-16% of electricity production, versus less than 2% today.
Coal prices also doubled in real terms, and nuclear construction costs were beginning to show up in electricity rates.
Energy costs as a percentage of GDP rose steadily from about 1973 to the end of the decade and into the early 1980s as a result of these and other factors. In addition to being higher, energy prices also were very volatile. Price volatility created market uncertainties that impeded economic growth by affecting purchasing and investment decisions.
The 1970s: Reliability Trends
The Arab oil embargo revealed to U.S. policymakers and consumers the risks inherent in relying on a few unstable foreign sources of crude oil.
Following the 1973 oil price shock, the Trans-Alaska Pipeline was authorized in 1977 to bring Alaskan North Slope oil to the lower 48 states.
Internationally the United States sought both to make existing producers more reliable through diplomacy and to diversify sources of supply. The United States and other large oil consuming nations formed the International Energy Agency to act as a counterweight to OPEC.
Oil supply shortages were exacerbated by low stock levels. In 1975, Congress authorized the establishment of a Strategic Petroleum Reserve of up to 1 billion barrels of crude oil, which would allow the United States to maintain an oil stockpile in case of a severe supply disruption.
With the sudden increase in oil prices, natural gas became more attractive, but its reserve base was shrinking and its price was heavily regulated. The Natural Gas Policy Act of 1978 created a single regulated market for natural gas and provided incentives to producers.
The 1970s: Environmental Trends
The energy crises of the 1970s led to greater recognition of the importance of new energy technologies and a significant increase in energy research and development sponsored both by industry and by the federal government.
The oil price shock of 1973 spurred government action to improve energy efficiency, particularly in the transportation sector. A 55 mph national speed limit was imposed and Corporate Average Fuel Economy standards were enacted requiring auto manufacturers to meet an average fleet requirement of 27.5 mpg.
Higher energy costs also accelerated energy efficiency improvements in the residential, commercial and industrial sectors.
Gains in energy intensity - the amount of energy needed to produce a dollar of GDP - began to accelerate, especially during the second half of the decade.
Carbon dioxide emissions from energy grew throughout most of the decade. However, as the decade progressed and nuclear power plants began coming on line, electricity production from non-emitting sources also began to grow.
U.S. energy security risks in the early 1980s reached 100 - a level exceeded only in 2008 - driven largely by the Iranian hostage crisis, the Iran-Iraq War, falling world oil production, and soaring energy prices. These factors contributed to U.S. stagflation and lower economic growth worldwide.
Despite an inauspicious beginning to the decade, U.S. energy security risks lessened throughout the 1980s. From 100 in 1980, the Index fell to 80.1 in 1989, a 20% reduction in risk over the period.
Ronald Reagan's presidency signaled a marked shift in U.S. energy policy, with a greater reliance on free markets. Coupled with positive trends that began in the mid- to late 1970s that took hold and continued throughout the 1980s, U.S. energy security improved over this decade.
On the supply side, complete oil price decontrol, a more accommodating production posture from the Organization of Petroleum Exporting Countries (OPEC), increasing production outside OPEC (including from Alaska's North Slope and the North Sea), a growing Strategic Petroleum Reserve (SPR), and the replacement of oil-fired capacity with coal-fired and nuclear capacity in the power sector combined to increase the amount and diversity of global energy supplies.
On the demand side, clear price signals and new auto mileage requirements spurred greater energy efficiency across all sectors of the economy. Overall, the U.S. economy in the 1980s improved its efficiency at the fastest rate over the historical record.
However, Congress also imposed a moratorium on leases for oil and natural gas exploration and production on the Outer Continental Shelf (OCS).
The 1980s: Geopolitical Trends
The Iran-Iraq War, which began in September 1980, caused oil production from those two countries to plunge from nearly 8 million barrels per day (MMbbl/d) in the late 1970s to just 2.4 MMbbl/d in 1981. The end of the Iranian hostage crisis in early 1981, however, helped restore calm in world oil markets.
In an attempt to defend a high price for oil, Saudi Arabia slashed its production to offset increases in supplies coming from Alaska and the North Sea and from other OPEC members exceeding their production quotas.
By 1985, Saudi oil production was one-third its level in 1980, an untenable situation that put tremendous strains on Saudi budgets. In 1986, Saudi Arabia and others ramped up production to gain market share, and OPEC discipline was shattered.
The end of the Iran-Iraq war in August 1988, and the breakup of the Soviet Union in 1989 also positively affected energy markets. The emergence of the Russian Federation and other countries from the former Soviet Union contributed to an increase in the diversity and reliability of world fossil fuel supplies.
The 1980s: Economic Trends
In the 1980s, the replacement of oil-fired power generation with coal and nuclear power helped insulate electricity consumers from swings in the price of oil. In 1987, Congress lifted restrictions on the use of natural gas by electric utilities and industrial boilers. After peaking early in the decade, retail electricity prices declined for the rest of the decade.
Oil prices were deregulated completely and the price of oil was allowed once again to achieve a market-clearing level.
Slow economic growth reduced demand for oil worldwide. Greater production from "price takers" within world oil markets meant that "price makers," primarily Saudi Arabia, had to cut production to support higher prices.
By the second half of the 1980s, rapid gains in efficiency and rising oil supplies led to tremendous downward pressure on prices. From a high of over $36 in 1981, the world price for a barrel of crude oil plunged to a little over $14 in 1988, its lowest level of the decade.
The 1980s: Reliability Trends
In the power sector, the oil crises of the 1970s prompted a move away from a fuel with very high geopolitical and economic risks - oil - towards a fuel with extremely low geopolitical and economic risks - coal. Regulation of natural gas slowed construction of gas-fired plants in the 1980s.
The security of world oil production showed steady improvement throughout the 1980s, due primarily to an increase in the diversity of oil suppliers.
After declining throughout the 1970s, domestic crude oil production began to increase as supplies from Alaska's North Slope began to come on line. But even additional supplies from Alaska could not offset lower production in the lower-48 states, and in the second half of the decade, overall domestic production resumed its long-term slide.
During the 1980s and into the 1990s, crude and refined oil stocks levels were much improved, mostly from purchases of crude oil for the SPR. From about a 70-day supply in the 1970s, stock levels generally ranged from a 90- to 100-day supply in the 1980s.
Federal and industry energy R&D spending fell throughout much of the decade.
The 1980s: Environmental Trends
High fuel costs early in the decade, coupled with deregulation's clear price signals, spurred greater energy efficiency across all sectors. During the 1980s, energy intensity - energy use per unit dollar of GDP - of the U.S. economy improved at its fastest over the historical period.
In the auto sector, implementation of Corporate Average Fuel Economy (CAFE) standards enacted in 1975 increased the efficiency of the U.S. automobile fleet.
Greater efficiency and the large addition of non-emitting nuclear power capacity in the power sector helped moderate the increase in U.S. CO2 emissions as the economy recovered. U.S. emissions intensity - CO2 emissions per dollar of GDP - improved rapidly throughout most of 1980s.
Despite the invasion of Kuwait by Iraq in 1990 and Operation Desert Storm, the trend towards lower energy security risks continued in the first half of the 1990s. In 1991, the Index achieved its best score of 774.2.
However, as the 1990s progressed, a number of factors combined to increase America's energy security risks.
Key policy initiatives in this decade included creation of a wholesale market for power that served to encourage construction of natural gas-fired generating capacity. Growth in natural gas consumption put strains on supplies, and by the end of the decade natural gas price spikes began to appear.
The United States also agreed to the UN Framework Convention on Climate Change (UNFCCC) and signed, but did not ratify, the Kyoto Protocol. State and federal programs - mostly voluntary - were initiated to improve efficiency and reduce greenhouse gases.
As the decade came to a close, the Index climbed higher, reaching 87.2 in 2000. In due course, energy security risks would approach the highs seen in 1980 and 1981.
The 1990s: Geopolitical Trends
Natural gas became an increasingly global resource in the 1990s following the growth of long-distance pipelines into Europe and the expansion of liquefied natural gas tanker trade. The Russian Federation, Qatar and Iran emerged as major natural gas reserve holders and producers.
Iraq's invasion of Kuwait in August 1990 created short-term instability in oil markets.
Damage to Kuwaiti oil facilities during the war and economic sanctions on Iraq caused oil production from these two countries to decline significantly.
However, Saudi Arabia picked up the slack in regional production, and Kuwaiti production recovered soon after the conflict. Also, in 1997, Iraqi oil was allowed back onto the market under the UN's Oil for Food program. As a result, the conflict had little long-term impact on oil prices.
The 1990s: Economic Trends
By the beginning of the 1990s, energy costs and expenditures were well below their highs and heading lower still. Total energy expenditures as a share of GDP were at their lowest level over the 40-year historical record of the Index.
Retail electricity prices, which began to decline in the mid-1980s, continued to fall throughout the 1990s. By the end of the decade, retail electricity prices were on average under 7 cents per kilowatt hour, their lowest level since the early 1970s.
An accommodating posture by OPEC and greater supply diversity meant that crude oil supplies were more than able to keep pace with rising demand. Throughout the 1990s, crude oil prices settled in a range of about $12 to $22 dollars per barrel.
The 1990s: Reliability Trends
Throughout most of the 1990s, power-generating capacity became more diverse, primarily because of widespread additions of natural gas and improved capacity in nuclear units.
Investment in transmission infrastructure throughout the 1990s was inadequate to keep up with demand, leading to a 15% decline in circuit-miles per gigawatt of peak capacity. This occurred at a time when a growing wholesale power market could have benefitted from additional transmission capacity.
Oil reserves became increasingly concentrated in a handful of countries in the 1990s, particularly Iran, Iraq, Saudi Arabia, the United Arab Emirates and Venezuela.
A steady decline in U.S. oil production added to this risk. Even with Alaskan North Slope production, total domestic crude oil output never achieved its pre-1970 peak and after 1985 began a long, steady decline that continued throughout the 1990s.
The 1990s: Environmental Trends
Strong economic growth coupled with low energy prices slowed the rate of energy efficiency improvements. A shift from passenger cars to SUVs coupled with increases in the number of vehicle-miles traveled caused the average fuel consumption per vehicle to increase.
Relatively cheap energy also led per capita consumption to rise gradually throughout the decade, part of a longer-term trend that started in the mid-1980s.
In the power sector, increasing coal- and natural gas-fired capacity and a slowdown in nuclear plant additions meant that fossil fuels played a bigger role in power production, which increased energy-related carbon dioxide emissions.
In 1990, President George H.W. Bush issued an executive order withdrawing new Outer Continental Shelf areas from energy exploration and production, consistent with the restrictions passed by Congress in 1982, and in 1998, President Clinton issued an order extending these restrictions through 2012. Restricted areas amounted to most of the Pacific and Atlantic coasts and the eastern Gulf of Mexico.
The worsening energy security situation that began in the mid-1990s carried over into the 2000s, leading to increased risks and higher energy costs.
However, this trend paused early in the new century during the economic recession that was prolonged by the terrorist attacks of September 11, 2001.
The ensuing economic recovery contributed to sharply increasing global energy demand that, combined with tight supplies, sent the Index to a record high score of 100.9 in 2008.
Congress and President George W. Bush enacted two energy bills during this decade - the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007, both of which provided a broad range of incentives, loan guarantees and mandates designed to accelerate growth in renewables, clean energy technology and energy efficiency.
President Barack Obama enacted a large stimulus package, the American Recovery and Reinvestment Act, which contained approximately $42 billion in funding for energy programs.
The Index fell by 9.4 points to 91.5 in 2009, but much of the decreased risk stemmed from lower energy costs after a collapse in energy demand during the 2008 recession.
In 2010, The Index jumped 6.5 points as energy demand and energy prices recovered more quickly than expected. The 2010 score of 98.0 was the fourth highest since 1970.
The 2000s: Geopolitical Trends
The 2000s were characterized by extreme volatility in energy prices related to fluctuating international demand for oil. Oil prices rose during the tensions following the 2001 terrorist attacks, fell with the next economic recession, and rose again with rising demand from the United States as well as from emerging economies such as China and India.
Operation Iraqi Freedom also unsettled oil markets, but Iraqi production did not collapse as it had following the first Persian Gulf War.
In 2003, Canadian oil sands became economically viable and reserve estimates shot up from about 5 billion barrels to about 180 billion barrels, which made this reliable source of energy a potentially huge player in international oil markets.
In 2008, Russia, Qatar and Iran - which combined hold between 55% and 60% of global natural gas reserves - met to consider creating a "big gas troika," which would essentially operate as an OPEC for natural gas to coordinate pricing and supplies.
The 2000s: Economic Trends
Energy prices rose in the 2000s as demand from developing countries increasingly drove up energy prices and production shifted to largely unstable areas.
From more than $17 per barrel in 1999, crude oil prices jumped to nearly $95 in 2008, with spot prices well over $140 per barrel and gasoline in some areas of the country spiking above $5 per gallon at times. When inflation is taken into account, the average "real" crude oil price in 2008 exceeded the 1980-81 high.
Although oil now accounts for a negligible amount (less than 2%) of electricity generation, increases in natural gas prices - which largely move in tandem with oil prices - and coal prices contributed to rising retail electricity rates.
Greater energy efficiency in all sectors of the economy and the shift away from manufacturing industries and toward service industries lessened the economic impact of high energy prices and price volatility.
The 2000s: Reliability Trends
Hurricanes Katrina, Rita and Wilma in 2005 caused short-term damage to domestic production and refining facilities in the Gulf of Mexico, which affected oil prices worldwide and prompted President George W. Bush to release onto the market crude oil from the strategic petroleum reserve (SPR) stockpile.
Although coal and nuclear remained mainstays for base load power, natural gas plants were constructed at a fast pace and accounted for the vast majority of new capacity in the power sector. By 2009, natural gas-fired plants produced more than 20% of the nation's power.
Additional development of electricity transmission infrastructure continued to lag behind generating capacity. The fragility of the U.S. transmission system was revealed during the Northeast Blackout of 2003, which left an estimated 55 million people in the United States and Canada without power.
The 2000s: Environmental Trends
Steady improvement in the energy intensity of the U.S. economy lessened the economic impact of high energy prices and price volatility and kept energy security risk well below what it would have been otherwise.
The Corporate Average Fuel Efficiency (CAFE) standard for light trucks increased twice during President George W. Bush's administration - once in 2003 and again in 2006 - affecting model years through 2011.
Carbon dioxide emissions from energy consumption increased at a much slower rate than in previous decades, with per capita emissions declining slightly.
Renewable sources of power and fuel grew significantly, but still accounted for only a small portion of overall energy.
Looking to the future
Looking over the next 25 years to 2035, there is no reprieve from relatively high risk levels. EIA's latest projection shows future risks starting high and remaining high. Indeed, our energy security situation is forecast to remain exceedingly risky, with the high risk levels experienced in the 1970s, early 1980s, and late 2000s forecasted to be the norm.
Rising energy costs and expenditures related to increasing costs for oil are factors that could increase future energy security risks. In addition, EIA's is now forecasting less crude oil output from the Gulf of Mexico and Alaska, which will reduce overall U.S. crude oil output by 1.3 million barrels per day below previous expectations and add to the insecurity of future oil supplies.
Factors dampening future risks include increased natural gas supplies primarily from shale gas, greater energy efficiency, a decline in energy expenditures as a share of GDP, and ongoing decarbonization of energy supplies.
The current Index calculates a future overall risk of averaging 93.9 over the entire 25-year forecast period from 2011 to 2035, a level exceeded only eight times in the historical record.
Looking to the future: Geopolitical Trends
Geopolitical factors are expected to increase future risks to U.S. energy security.
There are many factors that contribute to geopolitical risks, and many of these are very hard to predict because they involve the actions of nation states. Since 1970, unanticipated events and trends - such as the Arab oil embargo, the fall of the Shah of Iran, the collapse of the Soviet Union, and the rising economic influence of China and India - have affected international and U.S. energy markets.
Looking ahead, OPEC decisions, the rise of national oil companies political turmoil in the Middle East all could impact U.S. energy security in many ways. U.S. oil supply security can be achieved by capitalizing on the benefits of global trade while minimizing risks by increasing domestic production, encouraging the market diversity and reliability of world supplies, improving the petroleum intensity of the economy, and developing cost-effective alternatives.
The combined use of horizontal drilling and hydraulic fracturing is allowing producers to tap profitably into shale formations holding very large quantities of natural gas. The greater reliability and diversity of natural gas supplies brought about by widespread development of shale gas could weaken the ability of large natural gas-producing countries to fix prices and make production decisions through a natural gas cartel.
With the volatility of international relations today, it is imperative that U.S. energy systems have the resilience needed to weather the inevitable geopolitical events and crises of the future.
Looking to the future: Economic Trends
The 2008-09 economic recession relieved much of the upward pressure on energy prices, but in 2010 energy prices, led by oil, recovered much faster than expected because of supply and demand dynamics.
EIA projects that secure domestic coal will remain a mainstay of the U.S. energy mix and combined with lower natural gas prices linked to greater production from shale contribute to relatively stable retail electricity prices in the future.
Models generally forecast steadily increasing prices. However history shows that since 1970, energy prices have experienced a great deal of volatility. Unexpected price volatility in the future could create even greater economic risks.
Because energy efficiency is expected to continue improving, the share of GDP devoted to energy expenditures is not expected to rise much beyond its current level, a trend that should help moderate the impact of increasing energy prices on the economy. Greater energy efficiency will contribute to this trend.
Looking to the future: Reliability Trends
The reliability of the electric power system remains a concern going forward. The inability of power generating stations and the transmissions infrastructure to keep up with peak power demand could pose increasing risks to the reliability of the electric power sector. Smart grid technology could lead to substantial improvements in grid reliability.
Imports of both oil and natural gas as a share of demand are expected to fall. Increasing use of renewable fuels, efficiency improvements, and greater domestic production of natural gas from shale are expected to combine to increase the reliability of energy supplies.
Expanding energy exploration and production in the United States and streamlining siting and permitting of new energy infrastructure could reduce reliability risks.
Greater R&D into advanced technologies is needed not only to decrease their marginal cost but also to improve their reliability, such as developing technologies to compensate for the intermittency of some renewable power technologies.
Looking to the future: Environmental Trends
The amount of energy used to produce a dollar of GDP is forecast to improve steadily over the next 20 years due both to continued energy efficiency gains and a long-term shift away from manufacturing and towards services.
Energy efficiency in the residential, commercial, and industrial sectors all show improvement. Moreover, stricter CAFE standards will lead to a fairly significant increase the fuel economy of cars and light trucks.
The share of carbon-free electricity generation is expected to climb to and remain over 30%, largely because of growing generation from renewable sources and nuclear plants.
While carbon dioxide emissions from energy are projected to continue to grow, the rate of growth should be slow, and emissions per capita and emissions per dollar of GDP will continue to fall.
R&D will remain an important aspect of this sub-index because cleaner forms of energy, especially renewable energy, tend to be costlier and more intermittent than fossil fuels. Greater basic science and energy R&D can help lower the costs of alternatives, making them more competitive.
Text and options regarding future scenarios will go here.
Venezuela’s on-going political and economic crisis emphasizes the need for the United States to continue to diversify and grow its supplies of energy, particularly from our neighbor to the north – Canada. More pointedly, it highlights the importance of expanding and building more pipelines from Canada, such as TransCanada’s Keystone XL and Enbridge’s Line 3.
Lately, it seems that some environmental activists are against almost everything. Their latest cause? Trying to shut down air conditioning during Virginia’s muggy summer months. Fortunately, cooler heads have prevailed … thus far.