Category Archives: Oil

Energy Usage Per GDP Unit Declines Everywhere (via No Money No Worries)

Great chart showing improving energy efficiency around the world.

Energy Usage Per GDP Unit Declines Everywhere Recent data from BP (reprinted in the Economist) highlights the fact that energy usage required to produce one unit of GDP has declined for nearly a century in the US and has gone down almost everywhere else for the last twenty years. Note:  1 tonne = 7.33 barrels (click to enlarge) Even China has made great strides in reducing energy consumption per unit in recent years.  The spikes there correspond to the two periods of the greatest Maoist luna … Read More

via No Money No Worries

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Why can’t the US be like the US of the 1950s?

Sam Zell says Brazil is like ‘US in the 1950s.’ CNBC reports:

Brazil is booming and brimming with business opportunities—like the “US in the 1950s”—billionaire businessman Sam Zell told CNBC Wednesday. He said if Brazil continues on the same course, he predicts that the “fiscally conservative” nation will soon be one of the top two countries in terms of growth.

The real estate tycoon said Brazil has 8 percent debt, compared to 70 percent (of GDP) in the US. The country has a AAA rating from several major credit-rating institutions.

Why must we look for Brazil to be the US of the 1950s? Why can’t the US be like the US of the 50s? Let’s examine some changes that have occurred to the US in the last 50-60 years.

In the 1950s, government spending at all levels averaged 27.0 percent of GDP. Non-defense spending averaged 15.5 percent of GDP. Today, government spending is 43.9 percent of GDP and non-defense government spending is 37.7 percent of GDP. So government spending as a percentage of GDP has risen 62.6 percent in the last 50 years and non-defense government spending has risen 143 percent in that time. (You don’t hear these number reported to you on the news, do you?) Click here to see a chart of non-defense government spending.

The government now confiscates more of your money through taxes to pay for this largess. In the 1950s, government at all levels took in 26.6 percent of GDP. Now, government takes 30.4 percent of our money, a 14.3 percent increase.

But that’s not all. In the last fifty years, regulation has increased dramatically. Back in 1950, there was no Department of Transportation, Federal Highway Administration, Federal Railroad Administration, National Highway Traffic Safety Administration, National Credit Union Administration, Consumer Product Safety Commission, Environmental Protection Agency, Occupational Safety and Health Administration, Federal Energy Administration, Farm Service Agency, Food and Consumer Service, Agricultural Marketing Service, Federal Grain Inspection Service, Animal and Plant Health Inspection Service, Foreign Agricultural Service, Food Safety and Inspection Service, Rural Development Administration, to name just a few. Not only do these agencies cost money, they put an added burden on consumers, businesses, and employees which costs the United States $1.5 trillion each year. That’s like an added hidden 10% tax on the economy, which would bring the real rate of taxation up to 40.4 percent.

In the 1950s, government welfare spending accounted for 1.57 percent of GDP. Today, it accounts for 5.21 percent, a 231% increase. Wikipedia explains how LBJ’s Great Society caused this massive increase:

After the Great Society legislation of the 1960s, for the first time a person who was not elderly or disabled could receive a living from the American government. This could include general welfare payments, health care through Medicaid, food stamps, special payments for pregnant women and young mothers, and federal and state housing benefits. In 1968, 4.1% of families were headed by a woman on welfare; by 1980, this increased to 10%.

Lastly, the United States government has actively pursued a policy of limited oil production. Back in 1950, the US produced 5.9 million barrels a day of oil and had net imports of 545 thousand barrels, 8.4 percent of the total consumptions. In 2009, US production had risen only 21.8 percent over the previous 59 years to 7.2 million barrels a day. But consumption had risen 162 percent to 16.9 million barrels. As a result, imports increased 1,680 percent to 9.7 million barrels a day. At a current price around $70 a barrel, that adds up to $248 billion a year sent overseas, about 1.6 percent of GDP. Thus, over the last 60 years, trillions of dollars have left this country, to be spent primarily by unfree societies overseas. See oil data here.

Anti-capitalist British Petroleum

In recent weeks, those on the left including President Obama have attacked British Petroleum and capitalism for the oil spill in the Gulf of Mexico. It turns out, BP is no friend of the free-market system:

While BP has resisted some government interventions, it has lobbied for tax hikes, greenhouse gas restraints, the stimulus bill, the Wall Street bailout, and subsidies for oil pipelines, solar panels, natural gas and biofuels.

Coal’s Share of Energy Use Rises as Natural Gas Falls

The law of unintended consequences strikes again:

Coal’s share of global energy consumption rose last year to its highest level since 1970 as use of natural gas fell the most on record, a tendency that may continue, BP Plc said in a report.

Coal accounted for 29 percent of world energy use, BP said today in its annual Statistical Review of World Energy. The report measures consumption of oil, gas, coal, nuclear energy and hydroelectricity. Global consumption dropped 1.3 percent in 2009 to 11.16 billion metric tons of oil equivalent, the first decline since 1982, BP said.

While use of coal dropped last year, oil and natural gas consumption dropped more, meaning coal’s share of overall energy consumption rose. Coal consumption fell 0.2 percent to 3.28 billion metric tons of oil equivalent while gas declined 2.4 percent to 2.65 billion tons.

As we all know, coal burns much dirtier than oil and natural gas. We should be encouraging oil and natural gas production, in addition to nuclear, instead of discouraging them. Not only would there tremendous economic and geo-political benefits from increased oil and natural gas production and the resulting lower prices, it would actually produce less pollution than the coal energy it would replace.

Another example of how socialism is always nationalist

In The Road to Serfdom, Friedrich Hayek points out how socialism must always be nationalist (Ch. 10 Why the Worst Get on Top). The battle between the Obama administration and British Petroleum could spark a trade war. It is already harming relations between the US and the UK.

British business on Wednesday expressed alarm at the “inappropriate” and in-creasingly aggressive rhetoric being deployed against BP by President Barack Obama, warning that the attacks on the oil company could affect energy security and damage wider transatlantic industry relations.

Richard Lambert, director general of the CBI, a leading British employers’ organisation, told the FT the presidential attack was “obviously a matter of concern – politicians getting heavily involved in business in this way always is”.

He suggested the White House strategy was misplaced, stating that “apart from anything else, BP is a vital part of the US energy infrastructure. So the US has an interest in the welfare of BP, as much as the rest of the world does.”