Daily Energy Report
Declining US energy expenditures, EU ban on long-term gas contracts, IMF forecasts, latest data on global gas flaring, joint ventures for oil and LNG shipments, and more
CHART OF THE DAY: US Spending on Energy Remains Low
Figure (1) above shows US energy expenditures as a percentage of GDP, disposable income, and consumer spending. The trend is highly correlated with energy prices, especially oil and natural gas prices. The peak in the chart was in 2008 when both oil and natural gas prices climbed to record highs.
US energy expenditures declined in the second half of 2022 after rising for 8 quarters in a row following the collapse of energy prices in 2020 due to the pandemic. Energy expenditures, as a percentage of GDP, were the lowest in 2020 since 1970, based on calculations by the US Energy Information Administration (EIA).
While energy expenditures as a percentage of disposable income and consumer spending are highly correlated, the chart shows some decoupling between energy spending and GDP in recent years.
Several factors have lowered energy expenditures as a percentage of GDP, disposable income, and consumer spending. As a percentage of GDP, energy expenditures were around 8% in the early 1970s. Later, as oil prices increased to record highs in 1979 and 1980 against the backdrop of the Iranian revolution and the Iraq-Iran war, the percentage rose to 13%. At present, it is between 3% and 4%. Energy efficiency and declining energy intensity played a major role in reducing this percentage. And the same applies to the EU as factories moved from the West to the Far East while Western economies became more service-oriented, leading to a major decline in energy consumed for every GDP unit generated.
Although such a percentage decline reduced the impact of energy shocks on the economy, energy costs remain a concern for policymakers as we see happening nowadays in Europe.