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US oil security in middle of range Report says oil production and efficiency of use are improving but country remains exposed to high and volatile oil prices Alan Bailey Petroleum News
A new report on the oil security of 13 nations across the globe places the United States in fifth place, despite the surge in U.S. oil production, improvements in fuel usage efficiency and declining oil imports. The report, released Oct. 14 by Roubini Global Economics and Securing America’s Future Energy, presents an “oil security index” for each country, based on factors such as intensity of oil usage and the dependence of a country on either oil imports or oil exports.
“Despite the domestic oil boom, America’s oil security is only middle of the road,” said Securing America’s Future Energy CEO Robbie Diamond. “This index shows that the path to true oil security is not paved by production alone. The oil boom has generated important economic benefits, but our nation’s oil dependence leaves the economy dangerously exposed to high and volatile oil prices.”
Heightening demand Despite a global tendency to find more efficient ways of using oil based fuels, fuels that are primarily employed in the transportation sector, heightening demand for these fuels in countries such as China, where automobile usage is expanding rapidly, is causing worldwide demand for oil to continue to increase. At the same time, despite the recent resurgence in North American oil production, countries within the Organization of the Petroleum Exporting Countries, or OPEC, continue to dominate oil production, having around 70 percent of worldwide oil reserves and about 40 percent of worldwide oil production in 2012, the report says.
Increasing oil demand in developing countries coupled with limited growth in low-cost oil supplies imply the likelihood of persisting volatility and challenges in the oil market, the report says.
In gauging a country’s oil security, the report considers three main factors: the structural dependence of a county’s economy on oil, the exposure of that economy to oil price volatility, and the security of the country’s oil supply.
Structural dependency U.S. oil structural dependency, as measured by oil intensity, the volume of oil consumed in proportion to the country’s gross domestic product, has been slowly declining, as the efficiency of oil use improves. However, in terms of this measure the United States falls below European nations and Japan, where oil usage has become especially efficient. Per capita oil consumption in Europe and Japan is also lower than in the United States, and than in Australia and Canada, in part because of high fuel taxes and in part because relatively high population densities in Europe and Japan lead to people driving shorter distances.
Saudi Arabia, a country that subsidizes its citizens’ fuel usage, has the highest per-capita oil consumption of any of the countries discussed in the report.
Economic exposure to oil price volatility, as measured by how much a country spends on oil or spends on oil imports as a proportion of gross domestic product, puts the United States and European countries in relatively comfortable positions, because these countries have large, diverse economies, with oil spending being relatively low in proportion to overall gross domestic product. Countries such as Saudi Arabia and Russia, whose economies depend on oil exports, are especially vulnerable to oil price turmoil.
Security of supply Curiously, when it comes to security of oil supplies, many oil exporting countries, notably Russia and Venezuela, score quite low, primarily because of poor business and regulatory environments in these countries. The United States, Canada and the United Kingdom are ranked high in terms of security of supply because of significant domestic oil production and the availability of oil imports from secure neighbors. Oil stock holdings, such as the U.S. strategic petroleum reserve, also factor into supply security.
Taking the various oil security factors as a composite whole, Japan, the United Kingdom and Canada come top of the league table of the 13 nations that the report considers. The United States comes in fifth place, with India, Russia and Saudi Arabia coming at the bottom. China takes ninth place.
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