The Magazine

Energetic America

The energy policy the U.S. needs.

Sep 29, 2003, Vol. 9, No. 03 • By LEWIS E. LEHRMAN
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But this conventional view overlooks an important change in the way American employers and workers use energy. From 1950 to 1973, both employment and energy-use-per-worker increased by about 50 percent; as a result, total energy use more than doubled, growing nearly as fast as real GDP. Overall U.S. energy efficiency in producing real GDP was about the same in 1972 as it had been in 1954. But from 1973 to 1982 (during which the OPEC cartel sent oil prices up about ten times by restricting supply), energy-use-per-worker fell, reversing half the previous increase. Unemployment rose during this period from about 5 percent to about 11 percent at the peak in 1982. Since then energy-use-per-worker has been steady. Of course, many factors were involved, notably the response to changing energy prices. But when such variables are accounted for, employment is the only factor with a one-for-one relationship to total energy use over the whole period since 1950. It seems, therefore, that there is a provisional answer to the question "How much energy will America need?" The answer: "About the same growth in energy use as in employment." From the standpoint of government policy, another plausible way to formulate the answer is to say cheap and growing energy supplies are a crucial part of an effective policy of full employment at rising real wages.

Understanding this allows us to sidestep the acrimonious posturing so prevalent in the global energy debate. If, as in Japan and Germany, our population were expected to shrink by 20 percent over the next 50 years, pledging to reduce the use of both energy and hydrocarbons would be easy. Fewer people mean fewer workers, and fewer workers will use less energy. But while Japan and Germany have been sliding down the world population tables, the United States expects continued population growth. Fifty years ago, the United States was the third most populous nation in the world (after China and India). Today, with a population 90 percent larger than in 1950, we are still third. And demographic forecasts, based on birthrates and immigration, suggest the United States will still be third in population 50 years from now. The U.S. population is expected to increase by about one-half during that time. America on balance still believes in growth, unwilling yet to accept long-term national suicide like Europe and Japan.

Now, if energy use keeps step with employment, U.S. energy efficiency will continue to climb as in the past 20 years--but total U.S. energy use will also rise. Those Malthusians who favor an absolute reduction in U.S. energy and hydrocarbon use haven't yet spelled out to the American public what that would mean: namely, a corresponding decline in employment, a decline in the standard of living from what Americans would otherwise enjoy, and ultimately, a decline in U.S. population. It is true there are extremists who advocate zero or negative growth. But are the American people, properly informed and free to choose, willing to embrace it?

2. What kind of energy do we use and at what cost? Here the first fact is that the bulk of U.S. energy (about 86 percent in 2002) is still supplied by fossil fuels--coal, petroleum, and natural gas. Renewable energy sources--chiefly hydroelectric, wood, and alcohol--have contributed as much as 9 percent of total energy (in 1950 and again in 1982), but have dwindled to only 6 percent of total energy used, chiefly because of a decline in hydroelectric power. Solar, geothermal, and wind power, combined, amount to about 0.5 percent of total energy--because, in general, they are not and will not soon be competitive with fossil fuels on total cost and reliability. Other new age fuels, like hydrogen, have the same problem (see chart).

The second central fact about energy use is that the only significant reduction in reliance on fossil fuels has been the result of increasing nuclear electric power--which went from 0.4 percent of total U.S. energy consumed in 1970 to just over 8 percent in 2002, cutting American use of fossil fuels from 94 percent in 1970 to 86 percent in 2002--despite the fact that no nuclear power plants have been built in this country in a generation. The United States and the European Union are similar in their reliance on petroleum (39.8 percent in the United States vs. 42.7 percent in Europe) and natural gas (23.7 percent here and 24.5 percent in the E.U.). The main difference is that reliance on coal is 8 percentage points lower and on nuclear energy 7 percentage points higher in the E.U.