Geo-economic approach to energy security measurement - principal component analysis

Currently, there is no single accepted methodology for measuring energy security, while the prevailing scientific attitude is that energy security should be defined and quantified in a way to be able to follow rapid developments on the global economic and geopolitical scene. Considering the fact that the national economies represent an integral part of a dynamic international economy where external shocks (global financial and economic crisis, political conflicts, war, etc.) have the impact on energy prices and energy security in general, the paper proposes a new geo-economic concept of energy security. The new approach differs from the existing ones as regards the fact that, in addition to basic indicators, it takes into account sovereign credit rating as a measure of economic, financial and political stability - as one of the decisive factors which determines global energy trade and the ability of national economies to be stable and secure when it comes to energy. Determination and testing of Geo-economic Index of Energy Security was conducted by using the Principal Component Analysis in the European Union and in the selected countries of the world, over a period of ten years (2004-2013). The measured values of a newly proposed Geo-economic Index of Energy Security demonstrate significant deviations from the data obtained by using usual indicators of energy security. Observed individually, GDP per capita has the greatest impact on the change in final value of Geo-economic Index of Energy Security, while the impact of sovereign credit rating is slightly less. The study has shown that the least impact on energy security is exerted by energy dependence (which is traditionally used as a proxy indicator of energy security) and production of energy from renewable sources (which is defined by the EU policy as one of the methods for the improvement of energy security). Due to the results obtained, it is necessary to conduct further analysis of sovereign credit rating and to review the type and significance of the impact of Energy Dependence indicator as a measure of energy security in general.