The U.S. ranks 5th out of 13 heavily oil-dependent countries that are highly vulnerable to global oil price fluctuations.
On October 14, 2013, Securing America’s Future Energy and Roubini Global Economics released the Oil Security Index, which assesses the relative oil security of 13 countries including the U.S. The report emphasizes the need for active measures to reduce economic exposure and enhanced response capabilities to physical oil supply disruptions to strengthen oil security. Heavily oil-dependent countries remain highly vulnerable to price changes that could weaken economic activity and development.
According to the assessment, the term “oil security” is interpreted differently across different countries. For countries that are completely dependent on imports, oil security primarily refers to physical supply security. For countries such as the U.S., with dependable physical supplies and falling import levels, concerns pertain to high and volatile oil prices due to overall oil dependence and inefficient oil use. To determine a country’s relative vulnerability to global oil market changes, the Oil Security Index used seven metrics to assess an economy’s structural dependence on oil, economic exposure to oil price and oil price changes, and security of oil supplies. The index provides a country’s ranking for each indicator and overall ranking for relative comparison of multiple countries’ oil security over time.
The report shows that U.S. oil security and dependence have improved over the last decade despite sharp oil price rises. U.S. oil production has risen alongside declines in oil intensity, import levels, and consumption. Though the U.S. shows improvement in several individual metric scores, high and volatile oil prices represent uncertainties for oil security. Despite positive long-term trends in fuel efficiency and oil production growth, heavy oil dependence makes the country vulnerable to price fluctuations in the short-to-medium term as economic growth recovers. The index shows a high fuel consumption per capita level of 1.7 gallons per day.
The report also details efforts taken by oil-consuming countries to enhance energy security in response to price trends and volatility. The U.S. has reduced oil use for power generation from approximately 17 percent of total generation in the mid-1970s to less than one percent today. Increasing oil production from shale, carbonate, and other source-rock formations has enabled the U.S. to reduce imports by more than 50 percent since 2005. Though import volumes have declined, higher oil prices have increased net oil import costs. Petroleum accounts for more than 93 percent of energy in the U.S. transportation sector, despite increased use of electricity, ethanol, and natural gas.
According to the report, increasing oil demand in countries outside the Organization for Economic Cooperation and Development (non-OECD countries) and limited growth of low-cost oil supplies imply that market volatility and oil security challenges will remain, despite the emergence of unconventional supplies in North America. Non-OECD demand growth could more than offset OECD consumption declines.
October 15, 2013 via Energy Solutions Forum
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