US Energy Efficiency: We Have Come A Long Way

Via RealInvestmentAdvice.com,

The graph below paints a very interesting picture of US energy efficiency and a key structural economic change in this country.

For roughly 25 years after WWII, the US economy’s crude oil consumption nearly tripled. Feeding the growth were a booming post-war economy and strong population growth.

To put consumption in a different context, the graph shows consumption as a ratio to a dollar of real GDP, on a per capita basis.

It shows that consumption per dollar of GDP declined rapidly starting in the mid-1970s, suggesting an increase in US energy efficiency.

The US per capita energy efficiency is less pronounced but noticeable.

In addition to productivity gains and urbanization, there are a few reasons for the gains in efficiency.

• The 1973 Arab oil embargo was a shock to the economy. During this time, a quadrupling of gas prices and long gas lines forced policymakers and consumers to treat oil as a strategic vulnerability rather than a cheap given.

• Washington enacted numerous measures in response to persistently high oil prices in the 1970s. For instance, the Energy Policy and Conservation Act of 1975 mandated US energy efficiency standards for appliances and introduced fuel-economy standards. Legislators also encouraged a shift from oil and natural gas to coal for power generation. Utilities largely stopped building oil-fired plants.

• Structural change was equally important. The economy shifted from heavy manufacturing to services and technology, sectors that require far less energy per dollar of output.

Ironically, AI data centers are now driving a renewed focus on efficiency, this time with natural gas and renewables.