Tuesday, July 02, 2013

Our Energy Slaves Are in Recession

Charts of energy consumption are screaming "recession."

To get a feel for how many energy slaves you have, imagine hiring 40 people to drag you and your car down the street at 3 miles per hour. Replacing the energy in a gallon of gasoline with human labor is imperfect, of course, because the people you hire to drag your vehicle down the street cannot run 70 miles an hour.

The gallon (or four liters) of petrol will push your car about 25 to 30 miles at high speeds at a market cost of about $4. Imagine how much it would cost to pay 40 people to drag your 1.5-ton car 25 miles--a lot more than $4. (Weight of 2012 Ford Fusion: 3,285 pounds. Weight of 2012 Honda Civic: 2,765 pounds.)

You get the idea: every bit of fossil fuel you consume is the equivalent of an energy slave. Correspondent David P. (Market Daily Briefing) describes the concept thusly: "Your personal standard of living is derived (largely) from the number of energy slaves you have working for you." Energy Slaves - 5 charts

David kindly shared three of his five charts of energy consumption per capita (i.e. per person). This first is total energy consumption in the U.S. per capita.

The key takeaway here is how closely energy consumption tracks recession: notice how energy consumption cratered in the deep 1980-82 recession, and how it fell off a cliff in 2009, and has continued to weaken despite the official return of "growth."

Clearly, improved efficiency of transport, furnaces, electrical appliances, etc. leads to lower consumption while delivering the same output (miles driven, refrigeration, etc.). Just as clearly, higher efficiency cannot possibly account for the steep declines in recessionary periods. People use less energy because they have less money and are feeling less wealthy:
Next up: energy consumption in the residential household sector of the economy.While the downtrend since 2000 (lower highs and lower lows) could be attributed to improved efficiency, that cannot be the reason behind energy consumption's waterfall decline in 2011. That says one thing: recession.
How about the lifeblood of American life, transportation? Once again, the sharp decline in consumption says "recession." Consumption rose slightly in post-recession 2010, but then resumed its dramatic plunge:
Here is David's commentary on his charts. (The charts for the commercial and industrial sectors also show recessionary declines.)
Concept: personal standard of living is derived (largely) from the number of energy slaves you have working for you. Likewise, increasing or decreasing activity can be tracked by energy (slave) consumption in each sector. 
The series are produced monthly by EIA that totals the energy consumption in the US in 4 sectors (Industry, Transport, Commercial, Residential) from all energy sources. They are a very seasonal noisy series, so we use a 12-point moving average to smooth things out. We then divide this by population to arrive at - energy slaves per person per year for each sector in BTU. The MA makes it lag a bit, but the series are so noisy you would likely not see anything interesting if you didn't have some sort of adjustment. 
Industrial: 40% (per capita) drop since 1975 points at long-term deindustrialization
Residential: 12% (per capita) drop since 2008 points at real losses in standard of living
Transport: 14% (per capita) drop since 2008 - more standard of living losses 
Over a longer time period an argument might be made for decreasing energy use based on increased efficiency. Over shorter timeframes - not so much. And if you look at all the sectors, things are all still trending down except residential.
Thank you, David. Other than a decline in the standard of living (otherwise known asrecession), what other dynamics could be in play? There are at least three, though their effects are on the margins of consumption:

1. Telecommuting/working remotely. Working at home eliminates commuting and many business meetings.

2. The "Brown Truck Store": purchasing goods online and having them delivered by UPS, USPS, etc. saves energy by consolidating delivery to the end buyer.

3. Generational shift away from private auto ownership. Gen Y is far more comfortable with car-sharing (ZipCar, City Car Share, etc.), i.e. the access not ownership model: having access to a private vehicle no longer requires the immense expense of owning a vehicle.

This generational shift may be one reason miles driven per person has been declining: (via Doug Short): Vehicle Miles Driven: Population-Adjusted Fractionally Off the Post-Crisis Low. Adjusting for population growth, total miles driven in the U.S. is back to the levels of 1995, almost two decades ago.

While there are many positives to declining energy consumption, the question is:does this reflect a better standard of living or a lesser standard of living? In terms of replacing the ownership model with the access model and replacing long commutes with remote work, the answer is "better." In terms of overall economic activity, these charts scream recession, i.e. a declining standard of living. 

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

go to print edition1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Robert P. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your steadfast support and readership.Thank you, James M. ($20), for another splendidly generous contribution to this site -- I am greatly honored by your steadfast support and readership.

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