U.S. Energy Bonanza Does Not Equal Energy Security
While the U.S. may soon take over as the world’s largest producer of oil and natural gas, the U.S. ranks just 5th on a scale that measures energy security among 13 countries. A country’s “Oil Security Index” measures the structural dependency on oil of a country’s economy; a country’s exposure to the price of oil and to changes in that price; and the security of a country’s oil supplies.
The data was gathered and analysed by a non-partisan group called Securing America’s Energy Future (SAFE) and economic research firm Roubini Global Economics. As defined for purposes of the index, structural dependency comprises oil intensity and fuel consumption per capita. Economic exposure combines total spending on oil as a percentage of GDP, total spending on oil imports as a percentage of GDP, and oil exports as a percentage of the value of a country’s total exports. Supply securing is made up of oil supply security and total oil stockpiles as a percentage of consumption, including both commercial and strategic reserves.
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Saudi Arabia, which derives nearly 90% of its export revenue from oil, and Russia, which derives more than 50% of its export revenues from oil, are the lowest ranked of the 13 countries. Japan and the U.K. are ranked first and second respectively, primarily because they rank lowest on the oil intensity scale. Oil intensity measures the amount of oil consumed per $1,000 of a country’s GDP. Japan consumes 0.3 barrels of oil per $1,000 of its GDP; the U.S. consumes nearly twice as much, 0.56 barrels.
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What drives the U.S. down most in the rankings, though, it is fuel consumption per capita, which is second only to Saudi Arabia’s. The more fuel a nation consumes the more susceptible it is to supply disruptions and price volatility. Measured by gallons per capita per day, the U.S. consumed about 1.7 gallons in the first quarter of 2013. China, where demand for oil is growing fastest, consumed less than 0.2 gallons per capita.
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The SAFE report looks at U.S. oil security based on an index score of 100 in the first quarter of 2000. For the first quarter of 2013 the U.S. index score is 100.4 after reaching low point of 99 in the second quarter of 2008 when both U.S. consumption and oil prices were rising. Since then, U.S. consumption has fallen and crude prices have dropped.
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The report notes that “the trends of increased domestic oil production and improved efficiency are strengthening U.S. oil security” even in a high-priced environment. But everything’s not perfectly rosy: “[T]he United States would remain far from being truly insulated from the high and volatile oil prices characteristic of the global oil market” due to its total spending on oil as a percentage of GDP and its total spending on net imports.
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