With U.S. oil and gas producers continuing to do their thing, America's energy security continues to grow, according to the latest U.S. Chamber of Commerce assessment.
The 2014 edition of the Chamber Institute for 21st Century Energy's Index of U.S. Energy Security Risk is the fifth annual edition of the report, which tracks 37 metrics in four primary areas from 1970-2014. America's energy security risk dropped to 87.4 in 2013 -- the first time the score has been below 90 since 2004 -- and a 5% reduction in risk from 2012. The previous report found a decline in 2012 of 6.6% from 2011 levels (see Daily GPI, Aug. 22).
"Much of America's improved energy security over the past year can be attributed to increased oil and gas development, particularly from unconventional sources," said Energy Institute CEO Karen Harbert. "Given continued geopolitical uncertainty, rising U.S. oil and gas output couldn't come at a better time...[O]ver the long term, there is still the potential for big risks, especially from the continued forced reduction of coal, which threatens America's electricity reliability and diversity."
Of the 37 metrics studied in the report, 14 showed a decreased risk of 1% or more, 10 showed an increased risk of 1% or more, and 11 stayed the same as 2013 levels. In particular, rapidly expanding oil and natural gas output drove large improvements in metrics related to energy expenditures, price volatility, and imports, according to the report.
The sub-indexes measuring geopolitical, economic, and reliability risks also showed improvement while the sub-index for environment remained essentially unchanged.
Looking forward to 2040, the index shows rising risks related to crude oil prices and electricity reliability and diversity. For those reasons, after a continued period of declining risk over the next few years, risks will begin to climb again after 2018, the researchers predicted.
"Our index found that risks related to electricity generation diversity will rise to an all-time high by 2040, due largely to planned federal regulations targeting coal plants," said Steve Eule, Energy Institute vice president."These concerns have recently been echoed by the North American Electric Reliability Corp. and by various states that are looking at EPA compliance issues and should sound alarm bells for policymakers as they consider regulatory proposals."
New in this year's index is a "Side Case" section that examines 20 different representative scenarios from the Energy Information Administration's Annual Energy Outlook, including scenarios covering oil and gas resources, electricity demand, carbon pricing, and accelerated closure of existing plants, among others. The Energy Institute input this data into the Energy Security Risk Index, and it is able to demonstrate for each policy scenario the expected change in energy security risk between now and 2040, as well as its economic impact.