These charts offer powerful proof that people and economies respond to price incentives. Since 1970 the inflation-adjusted price of crude oil has increased by a factor of 10. Faced with the problem of increasingly expensive oil and oil by-products, the U.S. economy responded by reducing its reliance on oil and becoming more energy efficient. As the second chart shows, the U.S. economy today uses over 60% less oil than it did in 1970 to generate a unit of output.
As the chart above shows, the U.S. economy now consumes about 19 million barrels of oil per day. That is the same as it consumed in 1978, despite the fact that the economy today is two and a half times larger than it was in 1978. It's a remarkable achievement.
Since 2000, US real GDP has grown 25.4% ($12,565.2 billion in 2000 to $15,761.3 billion last year) while total energy consumption has remained flat around 7500-9000 quadrillion btu's per month.
ReplyDeleteAnd between 2005 and 2012, real GDP grew 8.5% while US greenhouse gas emissions fell 10%.
An under-appreciated development IMO.
Is this the main point - isn't it better explained by the increase in services as a % of GDP. It takes much less energy to produce a software package than a locomotive - the US can always import the latter.
ReplyDeleteThat's a good point: the service sector has indeed grown much faster than manufacturing and a lot of commerce takes place on the internet. But still, think of all the many extra cars and trucks running around. The US population is up 42%, and truck tonnage is up about 140% since 1978. Jet planes flying everywhere. Rail traffic has more than doubled. The physical part of the economy has grown significantly, and most of it moves thanks to oil. Car mileage has improved dramatically. Even the internet requires energy to run, and it uses a lot of energy. Come to think of it, expensive energy probably helped the internet grow. So many changes have come about that reduce our need for oil.
ReplyDeleteConsumption is down, prices are up.
ReplyDeleteWhat happen to the supply and demand model?
Consumption is down because prices are up. That is the fundamental law of economics.
ReplyDeleteConsumption is down because prices are up. That is the fundamental law of economics.
ReplyDeleteconsumption IN THE US is down, but oil is a global commidity and its proce is set relative to global demand, which has not decreased.
ReplyDeleteAlso, production is concentrated in the hands of a (somewhat functioning) cartel, aka OPEC.
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ReplyDeleteGrear posr. Let the price signal work. Probably gasoline should be more heavily taxed while cutting income taxes. But subsidized rural America doesn't like that.
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