Saturday, July 18, 2009

The Most Energy Efficient Economy in U.S. History

The chart above (click to enlarge) shows the increasing energy efficiency of the U.S. economy, using data from the Energy Information Administration, updated recently through 2008. As recently as 1970, it required 18,000 BTUs of energy for each real dollar of GDP produced, and by 2008 the energy required per dollar of real GDP has been reduced by more than 50%, to only 8,520 BTUs per real dollar of GDP. So the U.S. economy has more than doubled its overall energy efficiency in only 38 years.

Bottom Line: The U.S. economy has never been more energy efficient than it is today, and it just keeps getting more and more efficient every year as we find ways to produce more and more output with less and less energy. Amid all of the gloom and doom, this seems like something to celebrate. Over time, we're not becoming energy gluttons, we're actually becoming energy misers.


At 7/18/2009 11:08 AM, Anonymous Mark said...

I wonder if part of it is because some of the more energy intensive operations (i.e. manufacturing) are going overseas. The economy is becoming more and more dominated by services.

On the other hand, it seems like we are using more and more appliances and equipment (air conditioning, computers, etc.).

At 7/18/2009 12:51 PM, Blogger Dave Narby said...

You need to re-calculate that figure for REAL goods, and services that actually increase productivity.

Once you leave out everything else (that would be the majority of the financial services), that number isn't going to be pretty.

The financial services industry in the US, which is supposed to grease the wheels of trade, has instead become a huge parasitic anchor, and IMO needs to be (for the most part) cut loose.

At 7/18/2009 1:25 PM, Anonymous Benny The Libertarian said...

This is a terrific chart...and shows the incredible resourcefulness of man. And why the Peal Oil nuts are, well nuts.
The price mechanism is a wondrous thing.
BTW, we have an epic global glut of natrual gas brewing, looks good for decades and decades. Motor vehicles can run on NG.
Doomsters just get it wrong.

At 7/18/2009 1:30 PM, Blogger OBloodyHell said...

Oh, geez. GDP is GDP folks. It's wealth, period.

It doesn't matter about "shipping manufacturing overseas" or anything else. And frankly, if it did, you would not have seen declines in the 50s and 60s when we ramped up our industrial production to the highest then in the world.

At 7/18/2009 1:37 PM, Blogger jeppen said...

Energy intensity of the G7 countries (US is set at index 100, which is 222 tonnes of oil equivalent per million dollars):

Canada: 132
USA: 100
France: 77
Germany: 74
Japan: 69
UK: 64
Italy: 55

The world as a whole gets more energy efficient. But North America always stand out.

Let me float a layman's idea: Most of Europe has double the gasoline prices by taxation. If North America followed suit, wouldn't this counter the OPEC price cartel with a taxation cartel? I mean - supply and demand would meet at the same price point, but we would keep half of that price in national taxes.

At 7/18/2009 2:29 PM, Anonymous jimGR said...

Green energy could easily triple that 8.52.

At 7/18/2009 5:14 PM, Anonymous Mika said...

That's nice, and we can be proud of that. A small step in the right direction. But it doesn't begin to offset the immense increases in coal and oil production and consumption in the U.S. over those years and does not address the two biggest energy problems: dependence on mid-east petroleum and the profound environmental impact of fossil fuels.

At 7/18/2009 5:17 PM, Blogger Hot Sam said...

This comment has been removed by the author.

At 7/18/2009 8:34 PM, Anonymous Odofakyodo said...

The world as a whole gets more energy efficient. But North America always stand out.

This is a case of apples and oranges.

For example, our country is so much bigger than those other countries. Of course, moving the same resources across such vast distances is going to take much more energy.

We pay for our space, and frankly I like my space. Population density by country (People/km^2) (from Wikipedia):

Canada: 3
United States: 31
France: 110
Germany: 232
Japan: 337
UK: 246
Italy: 193

It seems like you would really have to do a detailed analysis of the distribution of resources among each country and the relation to that of neighboring countries, as well as each country's genetic dispositions, climate, and a whole host of other factors to put energy intensity in context and give it some meaning.

At 7/19/2009 1:33 AM, Blogger PeakTrader said...

GDP only reflects the production side. It's likely all the efficiency gains on the production side were used on the consumption side.

The U.S. not only leads the world in the Information and Biotech Revolutions, it leads the rest of the world combined. Consequently, the U.S. economy has become "lighter" on the production side. The products Google, Microsoft, Intel, Cisco, Apple, Genentech, Amgen, etc. weigh almost nothing.

However, the U.S. economy became "heavier" on the consumption side, e.g. measured in quantity of houses (including square feet), size of autos, volume of imports, etc.

U.S. living standards likely peaked recently, and may not improve for many years.

At 7/19/2009 5:04 AM, Blogger jeppen said...

Odofakyodo, the people-per-square-kilometer issue is bogus. As in Europe, most of your people are concentrated to cities and so goods and people travel quite short distances. Sure, you do pay some for your urban sprawl, but mainly you drive monster cars due to cheap gas.

At 7/19/2009 5:21 AM, Blogger jeppen said...

Robert Miller, yes, you are among "we", if you want to. You could just slash income or property taxes by the same amount as you hike gas taxes.

You state: "Our biggest single import source is Canada". Exactly where your hydrocarbons come from does not matter as they are more or less interchangeable (although refineries are somewhat specialized) and are globally traded.

Maybe the market is not that cartelized, but you do agree that a global 100% gas tax wouldn't raise gas prices by 100%? Much would eat into producers' profits.

You state: "We could cut the price of gas in half by increasing refinery capacity and reducing taxes."

This is nonsense, as least if you live in the US. The gas price is around $2.5/gallon, whereas unrefined oil spot price is around $1.6/gallon.

At 7/19/2009 7:04 PM, Blogger misterjosh said...

Taxes have a deadweight loss in social welfare unless they precisely match net negative externalities. That loss costs us dearly.

Thanks for bringing us back to basic economics principals. I doubt anybody in government would even understand that basic statement.

Of course our entire tax system also ignores your statement, so it makes me wonder - do we have any chance of remaking our tax system towards principles of economics instead of politics?

Definitely not in the next 4 years of course, but I don't think there's the strength of character in the US to do this.

At 7/20/2009 8:11 PM, Blogger Bob Cosmos said...

I'd like to see the chart drawn in constant dollars... say Y2K constant dollars.

At 7/21/2009 7:55 PM, Blogger Hot Sam said...

This comment has been removed by the author.

At 7/22/2009 3:58 PM, Blogger jeppen said...

Mr Miller, I don't see any contradiction in wanting to break the cartel and dismissing as irrelevant the fact that most of the US oil is not from the cartel.

So we agree that some of the tax hike would hurt producers' profits. Some would also serve to internalize the external costs of gasoline and traffic.

Now, you claim that the government would keep the revenues. It may be so - I thought the US was a democracy and the decision was in your hands - but you may know better. So just let me ask you this: If you could make such a tax trade - gasoline for income taxes - would you?

You talk about my "social engineering" - does this mean you consider all taxes equally destructive, or just that we morally shouldn't consider such practicalities when choosing what taxes to have?

If we shouldn't tax gasoline b/c its demand is inelastic, it is better to tax income b/c labour demand is more elastic? Does this make sense?

Btw, I think you yanks will find out that peak oil actually will occur and impact our lives to some extent. There is alternatives and we will all cope reasonably well, but you will find Europe better prepared. We can cope some by just lowering our taxes, but your monster cars and urban sprawl will cause you some pain.

At 7/24/2009 9:32 PM, Anonymous Anonymous said...

Peak oil. LOL

You just ruined everything by revealing you're a raving lunatic.

You might have sounded momentarily convincing in your sophistry if you hadn't said that. You might as well have started by saying you learned economics when you were abducted by aliens.

At 7/25/2009 3:40 AM, Blogger jeppen said...

Strange. Mr Miller has deleted his previous comment, and instead an anonymous guy says I'm a "raving lunatic" for mentioning peak oil.

However, the peak oil theory is quite mainstream. That a limited resource will eventually dry up in the face of exponential extraction is a mathematical fact. Granted, there are crackpots who think this will spell doom for the human civilisation, but I don't belong to them. As I said, I think we will cope quite well.

At 7/28/2009 11:18 AM, Anonymous Odofakyodo said...

Odofakyodo, the people-per-square-kilometer issue is bogus. As in Europe, most of your people are concentrated to cities and so goods and people travel quite short distances. Sure, you do pay some for your urban sprawl, but mainly you drive monster cars due to cheap gas.

I agree that many goods and people prefer and do travel short distances. However, I don't buy that the sheer size of our country does not have a significant impact. I live in Seattle. When I send a gift to my brother in Atlanta that package has to travel 2,700 miles. I once drove from Atlanta to Denver for a 3 month summer program. Obviously that is anecdotal, but it's pretty reasonable to see that nearly everyone does that kind of thing all the time. Individuals and businesses.

And yes, we do drive monster cars. And we have hi-tech infrastructures. And we have a huge array of people and climate. My points are: there is a whole host of factors that a simple Energy/GDP equation does not factor; and that we enjoy a lot of comforts of modern living - that's a product of success, and I don't mind using more energy to live a comfortable life.


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