This inaugural edition of the International Index of Energy Security Risk (International Index) is designed to complement the annual reports on U.S. Energy Security Risk (U.S. Index), first published by the U.S. Chamber of Commerce’s Institute for 21st Century Energy (Energy Institute) in 2010 and updated annually.
For over four decades, energy security has been a perennial concern not just in the U.S., but globally. It has only been recently, with the introduction in 2010 of the Energy Institute’s U.S. Index, that this concern has been matched with metrics allowing for a quantifiable assessment of energy security over time.
The U.S. Index introduced a first-of-its-kind capability to measure and track various aspects of our energy security risks. It provides two frames of reference: (1) historical measures of U.S. energy security back to 1970 and (2) forecasts of U.S. energy security calculated using the Energy Information Administration’s (EIA) Annual Energy Outlook (AEO) “business as usual” reference case projections.
The Energy Institute’s new International Index offers a third way to look at the question of U.S. energy security: Are U.S. energy security risks higher or lower relative to other countries, and how have these risks changed over time?
In an increasingly interconnected world, where the risks faced by other nations affect our risks as well, a well-designed index covering many countries can improve our understanding of global energy security risks. U.S. energy markets are not insular. Many aspects of U.S. energy security are by their very nature global. Recent years have seen global energy markets facing unprecedented challenges as well as opportunities. In previous decades, when the U.S. comprised a larger share of global energy production and consumption, our policies and actions had a bigger impact on global markets. Increasingly, however, geopolitical risks are imposed upon us rather than set by us. We see this today in the high and wildly fluctuating oil prices that, in earlier years, would have been unusual in a struggling economy.
Energy is a fundamental prerequisite of growth and development around the world, and despite the global financial crisis, energy demand has been steadily growing, especially in the large emerging economies of China, India, and Brazil. The International Energy Agency (IEA) estimates that well over a billion people still lack access to modern energy services, and providing these energy services is a priority for many governments around the world to lift people out of poverty.
In large part, energy security is complicated because key energy resources are geopolitically concentrated. Most of the world’s oil and gas reserves are found in a handful of countries, several of which are in political turmoil and not especially friendly to U.S. interests. Further, there is relatively little overlap between those countries that are the leading energy resource countries and those that are the major energy consuming countries. Reliance on international trade is large, growing, and vulnerable to disruptions. For these global commodities, events anywhere can affect supply and prices everywhere, even for self-sufficient countries. Energy security risks, therefore, pose challenges to all countries.