The Atlanta Fed's macroblog provides commentary on economic topics including monetary policy, macroeconomic developments, financial issues and Southeast regional trends.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
January 08, 2007
Are We Really Less Dependent On Oil?
Austin Goolsbee made a little noise last week, writing in the New York Times that the answer is yes:
... the data shows that much has changed since the wrenching days of the 1970s, for American industry at least. The energy used for each dollar of gross domestic product in 1980 was almost 70 percent greater than it is today. While we have collectively wrung our hands over the decline of manufacturing in the country, it has also reduced the relationship between energy prices and growth.
Greg Mankiw accepts the claim that
... energy prices have a smaller impact today than they did in the past.
... and Mike Moffatt was prompted to muse:
The relationship between the decline of manufacturing in the United States and the reliance on foreign oil is an interesting one.
The facts are the facts on the fairly dramatic increase in energy efficiency in US production, but if there has been a declining impact on economic activity, that looks like a fairly recent development:
The shaded bars in that picture are NBER recession dates. You only have to go back a few years -- to the 2001 recession -- to find a significant energy shock looking for all the world like the partner of an economic downturn. Just like the four recessions that preceded it.
Of course, as I have noted here before, it's possible that the correlation of energy price spikes and recessions in the 70's, 80s, and 90s was just a coincidence. But it's also possible that the run up in energy prices over the past five years has indeed had a significant negative impact on economic activity, despite the fact that the tipping point into recession has not yet arrived. Let's call the effect of energy shocks on the economy an open question.
As for a decline in dependence on foreign oil, it hasn't happened. Here's an updated version of a picture I showed some time ago, capturing energy consumption relative to GDP versus production relative to GDP:
As I wrote in my earlier post:
As we entered the latest series of oil shocks in 2002, energy efficiency -- measured by the quantity of energy usage per inflation-adjusted dollar of GDP -- had fallen significantly from 1970s levels. Energy dependence -- measured by the gap between consumption and production per unit of GDP -- has, on the other hand, remained remarkably constant. That says to me we should not be so quick to dismiss analogies with the situation in the 1970s.
The headline to Professor Goolsbee's article was "A Country Less Dependent on Oil is Free to Make Other New Year's Resolutions." I think maybe we shouldn't change that resolution just yet.
TrackBack URL for this entry:
Listed below are links to blogs that reference Are We Really Less Dependent On Oil?:
- Contrasting the Financing Needs of Different Types of Firms: Evidence From a New Small Business Survey
- Gauging Inflation Expectations with Surveys, Part 3: Do Firms Know What They Don’t Know?
- Gauging Inflation Expectations with Surveys, Part 2: The Question You Ask MattersA Lot
- Gauging Inflation Expectations with Surveys, Part 1: The Perspective of Firms
- Chances of Finding Full-Time Employment Have Improved
- Exploring the Increasingly Widespread Decline in Involuntary Part-Time Work
- The Long and Short of Falling Energy Prices
- And the Winner Is...Full-Time Jobs!
- For Middle-Skill Occupations, Where Have All the Workers Gone?
- A Closer Look at Employment and Social Insurance
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit