Fuel Cost as Percentage of Gross Domestic Product (GDP) Update

This is an update of the a chart presented in several earlier posts.  It is clear that the U.S. economy still faces the drag of significant energy cost, which represents over five percent of GDP.  In earlier periods of prosperity, fuel cost was consistently below four percent.  It is likely that this continued high cost has a lot to do with the current economic doldrums; money spent for energy cannot be spent on other things.  The energy cost would be noticeably higher were it not for the dramatic decline in the cost of natural gas, due in large part to the burst of production from the shale plays.  In 2012, coal consumption(1) was down significantly, while gas consumption was up.  If there's a "war on coal," natural gas is leading the charge.  Natural gas is not a ready substitute for liquid fuels based on petroleum however, and this cost remains by far the biggest portion.(2) 

Notes

(1) Coal price data for 2012 is not yet available from EIA; it is assumed the same in 2012 as in 2011

(2) The oil price for 2011 and 2012 is the Brent price, not the West Texas Intermediate price.  The cost of these two benchmark crudes, virtually identical from the 80s through 2010, diverged in 2011, with Brent consistently higher.  Brent essentially represents the cost paid by most U.S. refiners; the price trend of gasoline, for example, closely tracks the price of Brent. 

VMT and Gasoline Price Trend Update

This is an update of earlier data presented in my May 17, 2011 post.  Although there are fluctuations, it looks as if the flat, probably slowly decreasing, VMT trend continues.  It's hard to see how this could not be related to the historically high price of gasoline.

Will this flat or declining VMT trend continue?  It likely depends to a large degree on the price of gasoline, which in turn depends on the price of crude oil.  Currently, U.S. oil production is surging because of the horizontal drilling and hydraulic fracturing that is unlocking tight oil from shales such as those in North Dakota and southwestern Texas.  Will U.S. production grow enough to offset flat or declining oil production in the rest of the world?  Time will tell. And perhaps some of us are finding ways to function well without so much driving, so the flat or declining VMT trend will continue regardless of the price of fuel.

A related issue is the Keystone XL pipeline.  Some argue it should be approved because it will lead to lower gasoline prices.  But, gasoline prices are linked to the world price of crude oil.  The XL pipeline would allow the current moderate surfeit of crude oil that exists in the central U.S. to reach the world market.  Unless the growing quantity of crude oil now being produced in the U.S., augmented by (carbon-intensive!) oil from the Canadian tar sands proves to be enough to lower world oil prices, the XL pipeline is unlikely to lower the price of crude or gasoline to U.S. consumers.  It could lead to higher prices because with the pipeline in place the oil land-locked in the central U.S. could be sold for the higher world price.

Could it be that the high price of gasoline will gradually make driving less important in our way of life?  Could we become increasingly efficient in moving goods, information, and ourselves in ways that don't require so many vehicle miles traveled?  Perhaps, at least to a slight degree, this is already starting to happen, and some carbon can stay in the ground.