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02/08/2013

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Sweaterman

GDP up from (roughly) 2008 thru 2012 while energy consumption of all sorts is trending down during that timeframe?

I ain't buyin' it.

Well, unless you account for the fact that the GDP growth is based on all the funny-money tricks that have been done for the banks over the last 4 years...

Aboc Zed

I think the graph is useless because it compares things that cannot be compared.

Energy consumption is in physical units BTU, and GDP is in Dollars and the total of GDP depends on the _price_ one puts on the consumption of energy that drives economic activity that drives GDP calculation.

There are two levels at which the connection of GDP as measured in $ can disconnect from energy consumption as measured in BTU: first is the price of energy that can be easily manipulated and is artifact of the markets that are not efficient in any way; and second is the fact that GDP counts energy many times because as energy is transformed and within economy it keeps counted in GDP many times - the multiplier effect economists are so fond of. :)

So the graph is complete BS - useless.

JohnWDB

I think these first two commenters nailed it.

GDP isn't so much production as it is spending. It is more accurately called "Gross Domestic Consumption", but in economies without fiscal and trade deficits, these two quantities are equal. We are not one of those economies.

Without deficit generation, if energy declines, production/consumption should also decline, unless there are incredible efficiency/productivity gains. These will typically be most profound in the manufacturing sector, not the service sector, which is the majority of our economy. We have some productivity gains, but not enough to fully offset declining energy.

Anyhow, energy usage is declining, but we are consuming more! We are doing this by printing money and borrowing. neo-liberal Keynesians think this is good practice, and actually, it's not so bad in the short run if you expect large energy gains in the future. We do not. Quite the opposite.

Some may look at this and see success. "Finally," they say, "we're uncoupling energy usage and production." On the contrary, this graph succinctly summarizes how screwed our economy is. The more GDP continues to rise in the face of falling energy, the more catastrophic our collapse will be.

J. Drew

GDP up from 2009ish, primary energy consumption down, contrary to the trend. But we allready knew U.S. GDP growth for the past couple years was mostly fairy dust and unicorn farts.

JohnWDB

Also, the expansions in "green", "sustainable", and "alternative" energies hasn't offset the decline in coal and petroleum much. To expand those enough to actually produce "growth"...hoo boy.

Alexander Ac

It does not show debt or better yet debt-to-gdp ratio... Alex

Oliver

What's wrong with this graph?

I'm no expert, but I notice there's no red, yellow or purple in it, so it doesn't paint a pretty picture.

Please send my prize to: Paddy O'Bama, Wicklow Home for the Terminally Inept, Doubty Road, High Wicklow, Ire-land.

me

Come on....we are in or about to start a depression. Energy consumption is crashing because our real economy is dying. So why then is the GDP increasing? The Government is spending trillions and trillions to keep up the facade. GDP is equal to Consumer +Investment+GOVERNMENT......Energy is not decreasing because of some sustainable energy BS. I think we all get it.

Toozy

Dave, I am one of the faithful followers of your blog, I read and re-read each of your postings every day. Don't be discouraged with the traffic.

You have followers all over the globe who highly value your insight and honest opinion.

Truly yours,
T.

Peter

And I give a hearty 2nd to Tooty's comment! Although, less frequent posts will assuredly lead to even higher quality!

NoHype

There is nothing wrong with this chart if it were properly labelled as a currency devaluation chart.

Efficiency, productivity and all the other fancy words are just ruses to gloss this over. A car with thinner (or less) steel is still a car. But it will rot and disappear much faster than one with more energy embodied within it. Entropy is entropy. It does not happen twice. You can count it twice, but that's called currency devaluation: using two units to represent the same unit of entropy doesn't give you more energy expenditure, it gives you a new unit of measure worth half the previous one.

Now to what's wrong with it.

It understates reality in two ways.

First, monetary velocity is falling. That means when it returns to or exceeds its previous levels (and it will), "GDP" will hockey-stick upward in the face of the relentless downward trend of energy expenditure. Only then will we be able to measure the true devaluation as a result of the covert methods being used by the imbeciles who think they can hide their antics forever. This will result in a financial Baghdad Bob moment, and all who think they are "wealthy" and "powerful" will find themselves rulers without a country.

Second, raw energy expenditure doesn't measure the energy we actually get to use to create things (capital). EROEI is falling like a rock. If we had a chart showing the energy we actually get to use for other things besides acquiring more energy, all the non-GDP lines would be falling much more steeply.

Right now, the oligarchs have successfully pushed the sacrifices required by this situation off onto everyone except themselves (think austerity in Europe, inflation in China, and the failed state known as Mexico).

But the oligarchs themselves are generally several generations removed from common cause with their subjects. If the ruling class of the 1930's was akin to the court of Louis XIV, then the ruling class of the 20-teens is akin to the court of Louis XVI. The latter had a mendacious and ungovernable court. He lost his head over it.

Peter

Toozy's I meant to say!

P.S

The first thing that struck me was that there was nothing particularly 'sustainable' about the energy sources presented in the graph from the 'Sustainable Energy Factbook'. But we live in an Orwellian world where natural gas is 'clean' energy, so I shouldn't be surprised.

But aside from this, why has a 2013 factbook had to rely on Bloomberg's outdated economic forecasts for 2012 GDP figures? The US Department of Commerce has figures indicating a 0.10% decline in real GDP over the last quarter of 2012 - there's no need to appeal to Bloomberg's soothsayers to divine the 2012 GDP figures. Unless you would prefer to "make shit up" rather than address reality.

Mike Roberts

The US GDP calculations use all the tricks in the book (though I'm sure the book will be re-written to add a few more tricks) to make it look better than it is. The graph just shows how screwed the GDP is. Of course, it's possible that the energy graph is wrong too but I'm not sure if too much can be manipulated there and it probably looks good from some people's perspective, supposedly decoupling energy from GDP, as someone else mentioned.

dolph

There are some interesting things in this graph.
Notice, for example, that the rate of change of GDP was higher than the rate of change of energy consumption from 1990 to 2007.
Also, there is a brief increase in energy consumption from 2009 to 2010, likely stimulus driven. The decrease since then suggests GDP is going to decrease.

In theory, it may be possible to increase GDP even with decreasing energy consumption, given massive improvements in efficiency and conservation.

I don't think this is what happened. I think, like others, that GDP is manipulated.

Be thankful that for now we have information like this. Do not be surprised if this is unavailable or censored in the future. Keep that in mind.

Diogenes

Hi Dave,

First glance...GDP is given in "($bn)" ? - that's a fuck up, for sure.

Otherwise, it's based on numbers which, in the hands of economists, "...can always be used to fuck with you." ...

http://www.youtube.com/watch?v=ukygOptZtYc

Take care

Jim

1) Ha ha. Diogenes got it. The graph should be in thousands of billions, or trillions. Besides that, U.S. GDP was just north of $15 trillion in 2012 (not $14 tn).

2) The graph is drawn to make it look like the drop in energy consumption is due mainly to coal. Oil consumption dropped significantly more than coal via demand destruction, and it tracks the fluctuations in oil prices since 2008. Coal use in the U.S. dropped mostly because of increased NG use.

3) You've gotten some good comments (especially JohnWDB and NoHype). I'm guessing a lot of people would say this is a case of energy use decoupling from growth or efficiency measures. But it's really a matter of increased levels of debt (public and private):
http://visual.ly/united-states-debt-percentage-gdp-1940-2012

GDP has risen in the past despite temporary drops in energy use:
http://qn.som.yale.edu/content/should-government-subsidize-alternative-energy

But these examples have come after Carter, when debt levels started to increase rapidly. It's getting more pronounced, and that which can't last forever, won't. The big question is whether energy consumption will rise again (as it always has happened the past 100 years). But the drop after 2010, when the recession is said to have ended, is a red flag.

Jim

Last sentence of my previous comment, "when" = "after". Also, a better chart of total debt after 1980:
http://misunderstoodfinance.blogspot.com/2011/11/total-us-debt-chart-government-plus.html

gretchen

What's wrong with this graph? ~ It's all a fake ... as in we've put all our eggs into one basket and are counting our chicks before they hatch.
OR not to be all doomsday and such, but the gdp may be just a bit of a lagging indicator which will catch up on the ride down and start crashing the economy... again.

ok, now since you said this is an open thread, I just wanted to make an observation. I tore out my ridiculously funky and boring "updated" kitchen and I am restoring it to vintage 1920's which is the house's proper age. So I'm going around to all the flooring, tiles, counter materials,etc. suppliers in my town and also looking on the internet and I notice this very peculiar thing...there are only bland, drab, dirt and rock colors - greys, and browns available. Many of the fun, happy colors like green, red, yellow, blue and even good old black and white that would be appropriate to a 1920's kitchen have been discontinued in the last few years since the crash, they are just disappeared and not being produced anymore. It occured to me that maybe they want us to get used to living in dirt and rocks and stuff. ok so maybe that's a little paranoid, but truth to tell, it's weird.

to keep a little perspective on the ride down:
http://youtu.be/yHWHPPHpAj8

:)

Oliver

Gretchen - thanks for that link. Great lyrics, strangely calming.

pat

I just find and I really appreciate your site, your questions, your posts, your links. Cannot follow you on fb because I escaped from it few years ago, but I bookmarked DOTE. Will visit it on a regular basis.
Keep the good work ! :-)
Pat

Paleobotanist

Thank you for all the great essays. I particularly appreciate their compassion for the ordinary person trying to get by in a world that seems more and more insane. I will continue to drop by. I first started reading you at the Oil Drum and followed you over here.


Thanks

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