Report: US oil growth having limited effect on energy security

WASHINGTON — The United States may soon claim the throne as the world’s top crude and gas producer, but America’s dependence on oil leaves the nation at risk, according to a global energy security assessment issued Monday.

According to the analysis by Roubini Global Economics and Securing America’s Future Energy, the nation’s heavy reliance on petroleum fuels threatens to undo U.S. gains in efficiency and oil and gas production.

“Heavy oil dependence still renders the country highly vulnerable to price fluctuations in the short-to-medium term, particularly as economic growth — and fuel demand — recovers,” according to the report.

While physical supplies of oil may be more dependable in the United States — particularly with hydraulic fracturing allowing production of newly recoverable crude and gas resources — the nation’s overall dependence on oil and inefficient use of it leaves the economy “exposed to high and volatile oil prices.”

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Of 13 countries evaluated in the report, the United States ranks No. 5, behind Canada and the relatively oil efficient nations of Germany, the United Kingdom and Japan. The United States effectively climbed in the rankings ahead of Australia, Brazil, China and other countries because of its relatively high levels of domestic oil production, which helped make up for bottom-tier scores tied to consumption.

SAFE CEO Robbie Diamond said the oil security index underscores that “the path to true oil security is not paved by production alone.” Even despite the domestic oil boom, U.S. oil security is “only middle-of-the-road,” he said.

The disconnect between oil production and security also are illustrated by Saudia Arabia’s dead-last position, at No. 13. Like the United States, the oil-rich nation is a big consumer of crude. Saudia Arabia’s long status as a leading global oil producer also means the country is heavily dependent on crude exports for revenue.

The report’s release  kicks off a week of events tied to the 40th anniversary of the OPEC oil embargo. An interactive online version of the oil security index allows users to dig into quarterly data and rankings dating back to 2000.

Overall, countries were assessed for their structural dependency on oil, their economic exposure to oil price volatility and their vulnerability to physical supply disruptions.

For instance, analysts evaluated the structural importance of oil in individual countries by looking at per-person fuel consumption and the volume of oil consumed per unit of gross domestic product.

The economic exposure was assessed by looking at total spending on oil and net oil imports as a percentage of GDP, among other factors. In analyzing supply security, Roubini Global Economics looked not only at how vulnerable countries were to physical supply disruptions but also their capabilities to respond, such as by tapping emergency inventories.

Low fuel demand wasn’t enough to secure a high spot. While India has the lowest fuel consumption per person of all the nations assessed in the report, it is near the bottom of the rankings because of the country’s oil consumption and spending.

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Nouriel Roubini, chairman of the group, said the security index is meant to capture a range of diverse factors affecting how nations might be affected by changes in oil supply and demand.

“Changes in the supply and cost of oil, and the demand for it, impact individual nations in different ways due to unique national strengths, weaknesses, advantages, and disadvantages,” Roubini said.

Some of the report’s findings about the United States dovetail with warnings from lawmakers that the U.S. can attain energy security but will never be truly energy independent.  Oil prices are still set globally, so even soaring domestic production means that when prices climb, Americans get hit with the added cost too.

A report issued last month concluded that the United States’ rigid dependence on oil to fuel cars and trucks meant that Americans kept buying the stuff over the past decade, even as prices rose, at a cost of $1.2 trillion in additional federal debt.

Here are how 13 nations stacked up in the oil security index, from most secure to most vulnerable:

  1. Japan
  2. United Kingdom
  3. Canada
  4. Germany
  5. United States
  6. South Africa
  7. Australia
  8. Brazil
  9. China
  10. Mexico
  11. India
  12. Russia
  13. Saudi Arabia