U.S. Energy Situation: Exploring Consumption and Supply Issues Part 1
Mon, Nov 23, 2009

U.S. Energy Situation:  Exploring Consumption and Supply Issues Introduction

U.S. Energy Situation is a series of five articles sequentially addressing U.S. energy consumption, supply, concerns, solutions and policies.  The series is intended to prepare readers to better follow and participate in what the author hopes will be an informed debate about U.S. energy policy. 

The articles’ content originated as a slide presentation intended for general audiences, and both the program and the articles provide an overview and understanding of the U.S. energy position. The author has used publicly available data, mainly from U.S. government agencies, in his research.  He received no support or direction of any kind from any interest group, association or other entity in the research and development of these articles or in the creation of the underlying slide presentation.

1.  U.S. Energy Consumption; How Much Do We Use? The United States’ energy consumption nearly tripled from 1950 to 2007, driven by population growth and increased standard of living.  The United States’ population doubled during this same period, the average home became larger and most of the country grew accustomed to using more appliances and electronic devices. Understanding energy consumption requires analysis of several energy sources.  To facilitate comparisons of consumption and supply among different fuels, analysts often measure energy in British Thermal Units (“BTUs”).  In everyday terms, a single BTU is approximately the amount of energy released by burning one common kitchen match.  One BTU equals the amount of energy required to raise the temperature of one pound of water 1 degree Fahrenheit (from 59.5 degrees F to 60.5 degrees F).  Annual energy consumption in the U.S. is so great that it is often measured in quadrillion BTUs.  One quadrillion BTUs, or one “quad,” is nearly equal to the energy consumed by 6 million U.S. households in 2007.  One quad also, equals one billion million or (10)¹⁵ BTUs.  The use of the unit “quad” eliminates many zeroes, shortening numbers for discussion purposes.  In 2007, for example, the U.S. consumed 101.6 quads (101,600,000,000,000,000 BTUs) of energy. 

We often consume energy in the form in which we obtain it, as “primary energy,” but we also convert energy from one form to another, as in the case with electric generation. “Primary energy,” which is consumed in the residential, commercial, industrial, transportation and electric power sectors of our economy, comes from petroleum, natural gas, coal, nuclear and renewable energy sources.  The electric power sector consumes primary energy and converts it to electricity. The electricity is then delivered to consumers in the residential, commercial, industrial or transportation sectors. The total primary energy consumed by any sector includes energy that is lost or wasted because of inefficiencies.  The primary energy used to generate electricity, for example, includes the amount of electricity sold at retail as well as energy lost during generation and distribution.   “Delivered energy consumption” is the sum of primary energy consumed in the economy (excluding electric generation) plus electric retail sales in the residential, commercial, industrial and transportation sectors. Total primary energy consumption, then, includes the delivered energy we consume plus electric system generating and distribution energy losses for the same time period. In 1950, the United States’ population reached 152 million, and its total primary energy consumption was 34.6 quads; by 2007, the United States’ population increased to 303 million, and its total primary energy consumption grew to 101.6 quads. 

Two sectors of the economy accounted for more than 80% of this increase in primary energy consumption.  First, the primary energy consumed for electric generation increased 35.9 quads during the period (from 4.7 quads in 1950 to 40.6 quads in 2007).  And second, the primary energy used by the transportation sector rose from 8.4 quads to 29 quads (an increase of 20.6 quads) during the same period.  Delivered energy consumption increases among the residential, commercial, industrial and transportation sectors were more nearly equal between 1950 and 2007, with the transportation sector recording the largest increase.   Energy is a significant factor in the U.S. economy, accounting for 10% of Gross Domestic Product (GDP).  But as consumers, we are often aware only of the price we pay for gasoline and the amount of our residential utility bills. Gasoline and utilities, however, constitute only a small fraction of the total quantity of energy we actually consume each year. 

Most consumers are unaware of their role in the consumption of energy in the commercial, industrial and transportation sectors.  Many consumers may not realize that the cost of products and services they purchase includes the cost of this energy.   We pay for the energy consumed providing goods and services without knowing the portion of purchase prices attributable to energy.  Likewise, our purchases at the gas pump constitute only a small fraction of the 29% of U.S. delivered energy consumed by the transportation sector.  The cost of most energy consumed in the transportation sector, like the cost of commercial and industrial energy consumption, is included in the price paid for goods or services.

When we do pay energy costs directly (residential utility bills), we generally do not know and consider energy prices at the moment of consumption.  The utility bill is paid at the end of the month. We are unaware of the daily or hourly costs as we use lights, appliances or air conditioning.  Consumers’ lack of knowledge regarding energy cost turns energy consumption into an ideal vehicle for imposing hidden taxes on consumers or subsidizing or shifting costs away from favored groups.

Consumers also face challenges when seeking complete, unbiased information about the complex U.S. energy situation:  selective use of statistics favorable to particular agendas and incomplete, if not inaccurate “sound bites” may lead to distorted conclusions.  A prime example of an easily misconstrued sound bite is the frequently employed pronouncement that “the U.S., with only 3% of world’s population, consumes 22% of the world’s oil production.” By itself, this statement implies that the U.S. uses more than its “fair share” of world oil.  But with a mere 3% of the world’s population, the U.S. uses this 22% share of oil , along with other energy resources, to produce an approximately equivalent share (22%) of the world’s total GDP. 

The United States’ energy consumption, then, is proportional to the quantity of goods and services it produces.  In fact, U.S. “energy intensity,” or energy consumed for each dollar of goods and service produced, falls slightly lower than the world’s average. In other words, the other 97% of the world’s population largely benefits from the United States’ energy consumption.  Most importantly, significant near-term reduction of the United States’ total energy consumption could be achieved only through reductions in GDP.  Such a reduction would adversely impact United States’ employment and income statistics.

Viewing the United States’ energy consumption in the context of worldwide energy use leads to different conclusions than those perpetuated by “sound bite” statistics: worldwide increases in energy use greatly exceed the increase in the United States’ energy consumption.  From 1980 through 2006, the United States’ primary energy consumption increased by 28% (from 78 quads to 100 quads).  Primary energy consumption by the rest of the world over the same period increased by 81% (from 205 quads in 1980 to 372 quads in 2006).   Recent increases in energy consumption are largest outside the U.S.  Over the last decade, energy consumption in the U.S. has been basically flat (around 100 quads per year since 2000) while consumption by other countries has increased dramatically.

Between 2000 and 2006, while U.S. consumption remained at a relatively constant level, the world excluding the U.S. expanded its primary energy consumption by 25%, or 74 quads (from 298 quads to 372 quads).  China, for instance, doubled its energy consumption between 2000 and 2006 (from 37 quads to 74 quads).  During the same period, India’s energy consumption rose by 30%.  Energy increases in the rest of the world overshadow any energy reduction the U.S. can achieve, and they foreshadow increased competition and higher prices for available energy supplies.