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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 30 th North American Conference Washington DC October 10, 2011.

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International Indexes for Energy Security Risk

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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

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

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

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

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

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

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

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

Thank You!

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