[NTBKtrader]

[mekrob]

Yeah, but minimum wage was $9/hr back then (in 2007 dollars). I'm sure general wages haven't kept up as much as gas, or at least as much as that indicates. We've had a massive amount of transfer of wealth from the poor and middle to the upper class since then thanks to Reagan and the Bushes.

[Qolio]

Can someone explain me what the formula here behind the "Oil consumption per dollar GDP" is? I'm not able to come up with numbers of the same magnitude. If US oil consumption is 20 Mbbl per day, and yearly GDP about $13 trillion, then shouldn't it be 365*20e6/13e12 = 0.00056??

[pup55]

$this->bbcode_second_pass_quote('', 'O')il consumption per dollar GDP

[DantesPeak]

I think a more useful measure is industrail production vs. oil consumption, because the IP figures is inclusive of most all domestic energy use and not specifically adjusted for swings in oil use caused by weather.

GDP figures do not include the energy use embedded in imports, which as everyone knows, have gone up very substantially in the last 30 years. GDP figures also include military spending, but not the oil used by the US military.

[Bas]

$this->bbcode_second_pass_quote('Qolio', 'C')an someone explain me what the formula here behind the "Oil consumption per dollar GDP" is? I'm not able to come up with numbers of the same magnitude. If US oil consumption is 20 Mbbl per day, and yearly GDP about $13 trillion, then shouldn't it be 365*20e6/13e12 = 0.00056??

[MrBill]

$this->bbcode_second_pass_quote('DantesPeak', 'I') think a more useful measure is industrail production vs. oil consumption, because the IP figures is inclusive of most all domestic energy use and not specifically adjusted for swings in oil use caused by weather.

GDP figures do not include the energy use embedded in imports, which as everyone knows, have gone up very substantially in the last 30 years. GDP figures also include military spending, but not the oil used by the US military.

[nocar]

Well, I reason as Heinberg in 'the party is over'. If you are concerned with oil dependency, oil use per GDB is not as relevant as the fact that oil use is increasing (although the chart indicates it might have turned down right at the end of the time period).

nocar

[pup55]

$this->bbcode_second_pass_quote('', 'b')ut the enforceability of commercial contracts by lawyers certainly does help produce an environment conducive to domestic GDP growth.

[Windmills]

Some people have then gone on to interpret the supposed decoupling of GDP growth and energy usage as meaning we've becoming so crazily energy efficient that we can practically do anything in the US without needing any energy at all. In reality, we're just doing less and less that requires real, physical effort. Part of the story is certainly the fact that for decades we've been exporting more and more of our energy intensive and polluting industries to other countries while still maintaining growth. We've also being growing the economy with credit and debt, which only requires enough energy to swipe a card or sign a contract. Then you also have the slight of hand going on with the Fed and the money supply. The deeper you look, the more it all seems like a big scam and the more meaningless graphs like these seem to be.

[matt21811]

Windmills,
just because I can swipe a card to pay for goods instead of going to the physical effort of drving to the bank, seeing a teller, getting out some cash, then driving back to the store to buy the goods doesnt make the former a bad thing.
The same thing happened in both examples, goods were bought from a store. One just takes less energy than the other.

[MrBill]

You can interpret the graph in one of two ways (at least).

One is you have twice as much GDP per unit of oil (or energy) due to the shift from manufacturing to services and/or real gains in productivity/efficiency. That would be good.

The second less benign conclusion is that due to physical shortages of oil (or energy) you lose twice as much GDP as before. Especially if productivity/efficiency gains means less non-core transport to cut. That would be bad.

If you run a $5 trillion economy on 20 mbpdoe* (incl. your other sources of energy), and then you run a $10 trillion economy on 20 mbpdoe, it is obvious that if you lose any or all of your 20 mbpdoe it will have a more pronounced effect on your $10 trillion economy than the $5 trillion economy in terms of lost GDP.

This is not just funny money as is being suggested. It is real economic output.

A friend of mine just finished structuring a $1 billion deal to build a NG N2 plant in the ME. It was syndicated to 10 international banks. They must hold at least of 50% of those loans on their own books, but they can sell off the other 50% to other banks or investors.

So of course to build such a plant in the ME to produce NG, which will be sold to produce food somewhere else, generating economic gains that can be taxed to pay for social services as well as providing livelyhoods at each step of the chain you require a lot of 'services'.

Services such as engineering skills, project management skills, lawyers with international experience, banks with their risk management skills, salesmen that sell off pieces of the syndicated loans, all the way back to the independent investment advisors that help allocate individual investment portfolios for savers/investors around the globe.

So the industrial production in the ME that supports growing food is dependent on services. No legally binding contracts with many covenants, no syndicated loans, and no funding to build the NG plant.

If one step in that process generates, say, $100.000+, in fee income along the value chain then I do not see how that is somehow inferior to building a tractor or combine worth $100.000+ in order to plant and harvest the grain that depends on that N2 fertilizer?

Obviously any physical energy shortage effects both the goods and the services dependent on that supply of NG that will reduce GDP at all stages of that value-added chain - NG production, agriculture, manufacturing and services.

*mbpdoe - million barrels per day oil equivalents

[cube]

Is this graph adjusted for inflation?

Somebody should put a graph of GDP vs. debt. I know for sure it takes a lot more debt today to produce GDP

Perhaps an argument can be said we did not make any "improvements" per say. We simply traded one for the other.

We became more efficient in our use of oil at the expense of becoming less efficient with debt.

For example we outsourced a lot of the energy intensive industries to China to minimize our oil use but that just left us with a nasty trade deficit == debt...there's an interesting theory.

[MrBill]

$this->bbcode_second_pass_quote('cube', 'I')s this graph adjusted for inflation?

Somebody should put a graph of GDP vs. debt. I know for sure it takes a lot more debt today to produce GDP

Perhaps an argument can be said we did not make any "improvements" per say. We simply traded one for the other.

We became more efficient in our use of oil at the expense of becoming less efficient with debt.

For example we outsourced a lot of the energy intensive industries to China to minimize our oil use but that just left us with a nasty trade deficit == debt...there's an interesting theory.

[MrBill]

While reading The Capital Spectator - Money, Oil, Economics & the Search for the Bottom Line - I stumbled across an article directly related to Oil Consumption vs GDP. I have only managed to wade through the first 11 pages of this 59 page research paper, but I have gleened some tidbits of information on the topic at hand.

First to give credit where credit is due. If you do not already read these pages on a regular basis, I can recommend them for their good ideas and analysis.
$this->bbcode_second_pass_quote('', 'S')EPARATE BUT UNEQUAL
The time has come to once and for all put to rest the notion that crude oil and gasoline are joined at the hip as commodities in solidarity.

Yes, there's a thin veil of truth to the myth, born of the fact that the latter is refined from the former. But for all practical purposes, it's prudent to consider each separately from the other. The reason: each is driven by a separate, and at times dissimilar set of supply and demand factors.

Still, the two appear to share a commonality in pricing trend at times, promoting the illusion of equality. But as the news from Iran reminds, the danger in the conceit carries more than a little risk for clear thinking on energy matters.

[cube]

$this->bbcode_second_pass_quote('MrBill', '
')Source: Merrill Lynch on Sberbank
Costs peaking, transparency improving
July 3rd, 2007

There is nothing wrong with debt, so long as it generates a positive return

[matt21811]

$this->bbcode_second_pass_quote('cube', '
')When we hit PO every barrel of oil that gets taken "offline" will equal $2,000 taken away from the world economy.

[cube]

$this->bbcode_second_pass_quote('matt21811', '.')..
Written like it's a fact.

Unfortunatley the graph that started this thread clearly shows the ratio of oil to dollars is not fixed.

[kmann]

$this->bbcode_second_pass_quote('cube', '
')As mentioned before the USA increased it's energy efficiency by outsourcing the grunt work to China.

[joewp]

$this->bbcode_second_pass_quote('kmann', '')$this->bbcode_second_pass_quote('cube', '
')As mentioned before the USA increased it's energy efficiency by outsourcing the grunt work to China.