Latest Edition of International Energy Security Risk Index Shows U.S. On Top
The latest edition of the Global Energy Institute’s International Index of Energy Security Risk shows the United States as the top ranked nation in the world, based on 2018 data (the most recent available). In 2008, the United States was ranked 11th.
This International Index, including the Foreword by Assistant Secretary of State for Energy Resources Francis R. Fannon, went to press before the awful global health, economic, and energy impacts of the coronavirus pandemic were fully felt. It describes energy security and energy market trends as they existed from 1980 to 2018. No one could have guessed, however, the tremendous strain the response to a global pandemic would place on energy systems. Today, energy production is running well ahead of collapsing demand and prices, as economies contract at an unprecedented rate.
Even in a country as energy secure as the United States, a prolonged period of substantially lower demand, coupled with oversupply prove too much for some domestic producers to stay in business. Price volatility, another large source of risk, and the collapsing energy prices we have seen thus far in 2020—and perhaps maybe even a sharp spike in prices if production falls and demand picks up later in the year or next year—will have a significant impact on risks scores. So too could a consolidation of energy producers, especially if U.S. shale production doesn’t recover, and a greater share of our energy supply comes from foreign sources. Our 2022 edition will report and analyze these and other pandemic-related trends in the United States and other countries as they emerge over the next couple of years.
The Big Picture
The big story in this 2020 edition was the rapid improvement in U.S. energy security over the course of the last 10 years to the point where, in 2017 and 2018, America earned the highest energy security ranking of the 25 largest energy consuming countries, accounting for about four-fifths of global demand, examined in the report. The Index analyzes 29 metrics of energy security risk—covering the reliability and diversity of global energy supplies, imports, prices and market volatility, efficiency, emissions, among other factors—to quantify the risks of these countries from 1980 to 2018, the latest year reliable data are available.
So why the change from 11th in 2008 to 1st in 2017 and 2018? The answer is simple: hydraulic fracturing. Indeed, it is hard to overestimate how profoundly the application of hydraulic fracturing, horizontal drilling, and advanced seismic imaging has so rapidly improved our energy security by unlocking vast quantities of “unconventional” oil and natural gas.
Since the beginning of the shale revolution, virtually every aspect of U.S. energy security has improved across the board. By 2018, we were producing more oil and natural gas than ever; energy prices, especially for natural gas, were historically low; abundant natural gas was providing feedstock to a revitalized industrial base; the energy sector was providing a huge economic boost to states across the country; emissions were declining thanks both to greater power generation from natural gas and from renewables backed up by natural gas; efficiency was improving; and our geopolitical influence was increasing. The United States is also among the largest producers of coal, renewables, and nuclear power generation, making us the world’s single largest energy producing country, by far. All this and more made the United States, as measured by our Index, the most secure large energy user in the world.
As history has shown—and as we are experiencing today—it’s never a good idea to become complacent. An unpredictable or hostile policy and investment environment (some Presidential candidates are proposing to ban hydraulic fracturing, for example), geopolitical turmoil, another global pandemic, or other crises could derail the progress that has been made, increasing future energy security risks and making us more vulnerable in the process.
Even before the coronavirus pandemic, there were many emerging international challenges on the horizon that could affect energy security. Therefore, GEI is very pleased that this edition of the Index features a Foreword by Assistant Secretary Fannon. As head of the primary office in the federal government dealing with international energy issues, the Assistant Secretary is ideally positioned to identify these emerging issues. His foreword highlights, for example, the importance of market stability and the concentration of many critical earth elements used in many renewable and battery technologies—and it explains how smart diplomacy can help sustain the many energy advantages we have over the longer term and bring these advantages to other countries.
The report includes information on each of the 25 countries and an explanation of the key developments that have occurred over the last couple of years since the 2018 edition. In addition to the report, the GEI website also has an interactive tool that examines data for the top 75 energy consuming countries.
We should take comfort that the U.S. energy economy before the pandemic hit was in the best shape it has been in, in decades. In such an uncertain time, where nothing can be taken for granted, Americans do not have to worry about counting on a reliable supply of energy. The U.S. energy industry will deliver as it always does. And with proper policies in place and dynamic global engagement, it will met the challenges of a global pandemic.
Energy Security Risk Scores and Rankings for 25 Large Energy Using Countries: 2018