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short essays and reports on the economic issues of the day
2008 ■ Number 9

Energy and the Economy
Richard G. Anderson
s energy costs have risen, so have fears that these
ubiquitous trucks and SUVs averaged 11,000 miles annually,
higher costs will derail economic activity. Professor
consuming 612 gallons of fuel. For the typical household,
James Hamilton of the University of California at
heating and cooling comprises half of its housing-related
San Diego has noted that sharp increases in the price of oil
energy usage. In 1970, the average new American singlehave preceded each post-World War II recession in the
family house was approximately 1,500 square feet; by 2005,
United States. Yet, some analysts suggest that energy prices
the average home was 2,350 square feet. Appliances are
today put less pressure on the economy than they did in the
more energy efficient, but there are more of them. Survey
past—because less energy is used to produce each unit of
data for 1980 and 2001 show increases in the share of houseGDP; said another way, the economy’s “energy efficiency” has
holds with microwave ovens from 14 percent to 86 percent,
increased. But such a conclusion must be drawn with care.
dishwashers from 37 percent to 53 percent, personal comThe chart displays annual U.S. energy use relative to use
puters from zero to 56 percent, and central air conditioning
in 1970. The top line shows aggregate energy use, which in
from 27 percent to 55 percent (the share of households with
2007 was 50 percent more than in 1970. The bottom line
no air conditioning dropped from 42 percent in 1980 to
shows energy use per unit of real GDP, which in 2007 was
23 percent in 2001).
50 percent less than in 1970. Correctly assessing these trends
The constancy of the level of U.S. energy use per capita
requires adding one more variable: labor productivity (that
suggests caution when analyzing the impact of higher
is, increases in GDP per hour of work). The chart’s center
energy costs: Per-person energy intensity has changed little
line adjusts roughly for productivity gains by displaying the
during the past four decades. ■
quantity of energy consumed per capita. Since 1970 energy
use per capita has risen and fallen with energy prices
and the business cycle, with notable decreases during
1975, 1979-82, 1990-91, and 2001. Yet, the quantity
Energy Use in the United States 1970-2007
of energy consumed per capita in 2007 was approxiAnnual Data, Normalized, 1970 = 100
mately unchanged from that in 1970.
Energy use per capita is only a rough measure of
the economy’s energy dependence because it does not
Total Energy
separate the economy’s varied uses of energy. It does,
however, emphasize an important underlying theme
of America’s energy use: While energy efficiency has
improved in almost every aspect of business and life
at home, higher living standards have fully consumed
Energy Per Person
that gain—overall energy use per person has changed
little during the past four decades. Examples abound.
In 1970, the average passenger automobile was driven
10,000 miles annually and consumed 737 gallons of
Energy Per Unit of GDP
fuel; in 2005, annual mileage was 12,400 using 554
gallons. In 1970, light trucks (then used almost
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006
exclusively by business) averaged 8,700 miles annually, consuming 866 gallons of fuel; in 2005, near-


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