International Indexes for Energy Security Risk

1. International Indexes for Energy Security Risk Daniel E. Klein Christopher D. Russell Twenty-First Strategies, LLC Stephen D. Eule Institute for 21st Century Energy, U.S. Chamber of Commerce USAEE/IAEE 30th North American Conference Washington DC October 10, 2011

2. 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

3. 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

4. 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

5. Various products under development • 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. • 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 • Energy Efficiency Trends (all countries) • Energy, transportation, and CO2 intensities • For each country, absolute & relative to OECD trend

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

7. 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

8. 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

9. Thank You! www.energyxxi.org/