A New Way to Measure U.S. Energy Security

By Iddo K. Wernick Stephen D. Eule

The fundamental threat to American fuel supplies today from the current conflict in the Middle East is small thanks to high levels of domestic production brought about by the Shale Revolution. Over the long run, ensuring the security of American energy would benefit from benchmarks that inform policy and allow for congressional oversight. Both the Congress and future administrations need a measure of U.S. Energy Security that not only encompasses threats to America’s supply of hydrocarbon fuels, but also the supply of energy-critical minerals. Such a measure would also need to capture emerging twenty first century threats like cyberattacks on energy infrastructure.

The National Center for Energy Analytics U.S. Energy Security Index (ESI) offers a single, transparent measure of how the nation’s energy security is faring and where it might be headed. The factors impacting the composite ESI score offer insight to policymakers on the emerging vulnerabilities. Over the last five and a half decades, the contours of the ESI follow the wars in the Middle East of the 1970s, the breakup of the Soviet Union, and the Shale Revolution of the late 2000s. The ESI also shows the impact of new energy technologies in the last decade and their potential impact on U.S. energy security over the next decade.

Productivity gains from innovative technologies like advanced seismic imaging, horizontal drilling, and hydraulic fracturing drove the Shale Revolution that shook international energy markets more than anything in a half century and turned America into an energy superpower. The growth of new energy producing and consuming technologies in the last decade has introduced new vulnerabilities for U.S. energy security, this time not from fuels but from minerals. 

How well situated is America to meet the demand for these minerals securely? Not very. The United States has ample mineral reserves but presently lacks the capacity to mine and process them into finished metals. Decades of disputes over land rights and onerous environmental regulations have discouraged mining investment. The need to compete with state owned and government subsidized mining concerns that distort international markets have also had their effect. The steady decline in the American mining and mineral processing sector since the 1970s has left the U.S. (and other OECD countries) largely dependent on foreign suppliers for most of the minerals and metals used by energy producers and consumers, often embedded within industrial equipment and manufactured products.

After years of restrictions and underinvestment in mining and mineral processing, today China controls between 50% and 80% of world production for finished aluminum, crude steel, graphite, and rare earths. By comparison, in 1973 the Organization of the Petroleum Exporting Countries (OPEC) cartel produced about 53% of the world’s oil and produces less than 40% today. 

The prospects for technological advances to provide sweeping changes in productivity that transform the domestic mineral industry seem remote. No doubt, AI will enable miners to discover and better exploit more mineral deposits. Nonetheless, these innovations hold far less promise for the mining industry than those brought by the Shale Revolution to oil and gas. 

The most effective way to reduce the risks to U.S. energy security associated with future minerals supplies must come from regulatory reform and the reindustrialization of America’s mining and minerals processing industries. President Trump issued detailed Executive Orders during both his first and second administration outlining coordinated government actions to encourage the development of domestic mineral supply chains. To reduce the burden of permitting for new mines, the White House Council on Environmental Quality has reformed NEPA regulations clearing a path to reform NEPA procedures in all federal agencies many of which had not been updated in decades.

Eventually, congress needs to act to simplify the permitting process and shorten mine development times, currently estimated at 29 years from discovery to production. Clarifying land use interpretation under federal law (See the Mining Regulatory Clarity Act) would also open the door to necessary new mine production. Further federal action is ongoing through diplomatic engagement aimed at diversifying mineral supply chains via multilateral alliances with allies through the Minerals Security Partnership and Pax Silica that includes mineral rich Canada and Australia, and cover countries from Argentina, Greenland, Ukraine and Türkiye to India, Singapore, Israel, and the United Arab Emirates (UAE)

Looking to the future, ESI aligns with forecasts of rising U.S. electricity demand from the U.S. Energy Information Administration (EIA). According to EIA, new wind, solar, and nuclear generation is expected to satisfy much of this electricity demand. This places a premium on the uranium to fuel nuclear reactors, the lithium going into grid storage batteries, the silver used in photovoltaic arrays, and the rare earth magnets essential to wind turbine generators. 

Without effective oversight and policy action, America runs the risk of again placing our fundamental energy security in the hands of foreign actors beyond our democratic reach and control as we have in the past. Given our current weak position in global mineral markets, shortages of copper, nickel, and neodymium that undermine the entire U.S. energy system may replace the oil embargos of the 1970s as the primary threats to U.S. energy security. Using the ESI to track emerging threats to U.S. energy security – whether from disruptions in global energy markets, interruptions to mineral supply chains, or cyberattacks on U.S. energy infrastructure – offers a practical, effective way forward for managing future risks to U.S. energy security and improving America’s geopolitical position.

Iddo K. Wernick, PhD is a senior fellow at the National Center for Energy Analytics.

Stephen D. Eule is a visiting fellow at the National Center for Energy Analytics.

This article was originally published by RealClearEnergy and made available via RealClearWire.