Measuring the energy security implications of fossil fuel resource concentration

Economic assessments of the welfare effects of energy insecurity are typically uncertain and fail to provide clear guidance to policy makers. As a result, governments have had little analytical support to complement expert judgment in the assessment of energy security. This is likely to be inadequate when considering multiple policy goals, and in particular the intersections between energy security and climate change mitigation policies. This paper presents an alternative approach which focuses on gauging the causes of energy insecurity as a way to assist policy making. The paper focuses on the energy security implications of fossil fuel resource concentration and distinguishes between the price and physical availability components of energy insecurity. It defines two separate indexes: the energy security price index (ESPI), based on the measure of market concentration in competitive fossil fuel markets, and the energy security physical availability index (ESPAI), based on the measure of supply flexibility in regulated markets. The paper illustrates the application of ESPI and ESPAI with two case studies France and the United Kingdom looking at the evolution of both indexes to 2030. (C) 2009 Elsevier Ltd. All rights reserved.