Oil Growth Now Trails Growth in Energy and GDP . . .
The growth in world oil consumption has leveled off to only about 1 percent per annum while both energy growth in general and GDP continue to rise at a faster pace. That's the essence of a graph included in Gail Tverberg's essay, "An Economic Theory of Limited Oil Supply," posted on The Energy Collective this week.
The graph tracks the rate of those three factors - oil consumption, energy consumption in general, and GDP - from 1968 to the present. Oil is represented by the red line, energy consumption by the green line and GDP by the blue. The horizontal axis is the horizontal scale, the vertical axis represents the percentage of growth over the previous year for each year. Notice that growth can also be negative and has been for oil growth on several occasions. Only once, in 1982, did energy growth dip into negative territory and GDP growth has never dipped below 1 percent, although 2009 did mark a low point.
Until 1974, oil growth regularly exceeded energy and GDP, rising at a phenomenal rate of 8 percent and above in 1968-1970. After the Arab Oil Embargo it plummeted, falling into negative territory until hitting an astonishing - 3.8 percent in 1982. Since 1984 it has been back in positive territory but never more than slightly above 2 percent.
Oil and energy tracked each other pretty will until 2004, when a gap of about 1 percent opened between the two. Oil growth is now a full percentage point below GDP growth and even more below energy. In an unusual turn, overall energy growth has exceeded GDP growth over the last two years. Since 1974, this had happened in only one year - 2004.
The lesson seems to be that oil is playing a smaller role in economic output, meaning it is being replaced by other forms of energy. The close association between energy and economic growth, however, seems, if anything, to be getting stronger.