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short essays and reports on the economic issues of the day
2002 ■ Number 12

Michael R. Pakko
his spring, the U.S. Congress returned to a topic
that has become a staple of political discussion in
Washington: the role of energy in the economy and,
in particular, the dependence of the U.S. economy on energy
Since 1973, when President Richard Nixon announced
the goal of making the United States energy-independent
by the end of that decade, the nation has steadily increased
its energy imports. This trend is usually expressed in terms
of petroleum imports. According to statistics from the U.S.
Department of Energy, the United States imported about
one-quarter of all the petroleum it used in the early 1970s.
By 2000, that fraction had risen to nearly 57 percent. When
all sources of energy are considered, not just those from
petroleum products, import shares have not been as large.
As measured by total British thermal units (BTUs) generated from all sources, the U.S. reliance on imported energy
rose from about 10 percent of total energy used in the early
1970s to nearly 25 percent in 2000.
Over the same period, however, the United States has
become much more efficient in its use of energy resources,
mitigating the overall dependence of the economy on foreign energy supplies. Economic theory suggests that when
a factor of production such as energy is subject to supply
uncertainties and price spikes—like we have seen since the
1970s—the users of that factor have incentives to economize
by substituting other factors and switching toward production techniques that do not depend so heavily on that
factor. As illustrated in the accompanying chart, the U.S.
economy has, indeed, become much more efficient in its
use of energy over past decades, particularly since the early
1970s. In terms of energy consumption per unit of real
economic output, efficiency has nearly doubled. Between
1970 and 2000, the energy needed to produce one dollar of
real gross domestic product (GDP) declined from nearly
19 thousand BTUs to 10.6 thousand BTUs. Were it not for
this improvement in energy efficiency, the U.S. might very


well be even more dependent on imported energy than it
is today.
The chart also shows that, as the U.S. economy has
grown and diversified, domestic energy production has also
declined relative to total output. With energy production
and consumption both falling relative to GDP, the gap
between the two—net energy imports relative to GDP—
has changed little since the 1970s: In 1973, energy imports
amounted to 3.0 thousand BTUs per dollar of real GDP
produced. In 2000, that measure of energy dependence
stood at 2.9 thousand BTUs. When measured relative to
total economic activity, therefore, these statistics show
that the economic significance of energy imports has not
changed substantially over the past quarter-century. ■

Energy Production and Consumption
(Per Dollar of Real GDP)
Thousands of BTUs/Real 1996 Dollars




Pr oduction


1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

SOURCE: U.S. Department of Energy.

Views expressed do not necessarily reflect official positions of the Federal Reserve System.