I liked the "visuallizing economics" chart: So the top five percent get more (31%) of the national income than the entire bottom 60% (25%)!

But on average income, it was ten thousand in the fifties when estimates of happiness were higher than in later decades.

To the extent that I followed it, it seems the article is saying that there is lots of room for rapid conservation of oil without imposing much suffering, because of the resiliency provided by efficiency.

Is that it, or am I missing something?

Marco,

Thanks for an interesting post, and a lot of interesting graphs.

One issue I might raise is that there seem to be a lot of different kinds of impacts of gasoline shortages. In 1979, a mild form of rationing was put in place (odd/ even days, limited purchases), and some parts of the country had lines. Instead of impacts being less this time around, I would argue that they might just be different.

A number of people have shown that recessionary economic impacts seem to come from high prices--and these seemed to be worse in the recent round of price hikes than in the earlier round of price hikes. One reason they might be worse is that income distributions have been getting more and more skewed--more people are in the lower income distributions now than in 1979. Another is that the amount of debt has ramped up in the last 30 years, and many of the poor people are living on the "edge", even before the price hikes.

Marco, who do I need to talk to to get the Piggy Bus franchise for South Florida? Man, I think I could sell a bunch of those around here...Especially since the Hummer Franchise has now become defunct.

If I am right in assuming that resilience is the ability of a system to withstand shocks, specifically in this case a decline in the supply of a key resource, then I am not sure that simply improving the efficiency of that resource's consumption improves resilience.

The conclusion I draw from this key post, is that far more of the US's oil consumption is now discretionary, a result of improving overall wealth. In the 1970s the US drove a lot less, and that was because there was less need to drive. Shops, movie theatres, and other centres of consumption could be reached without driving by more people. There were fewer suburbs. However, the low efficiency of cars meant that there was little discretionary driving, and the oil shock caused real shortages.

However, in 2008, there are more people, driving further, and in much larger vehicles, with modestly improved efficiency. When the supply peaked, forcing up prices, people had more options. People who lost their jobs did not need to drive to work. People could stop driving to go the movies. In multi-car families the more efficient vehicle could be used for the longest journeys. People could even afford to buy a small, dramatically more efficient vehicle in some cases, with a government handout. The piggy was much more fat.

That bodes well for the US. In Europe, cars are much more efficient. Even though we have public transport, smaller commutes and more local amenities, I am not sure so much of our consumption is discretionary. High taxes mean we don't burn much more oil than is necessary. We are more efficient but less resilient.

The key to resilience is flexibility and adaptability. My lifestyle would be much more resilient if I were in a 2 car instead of 1 (petrol) car family as now. My ideal combination would be a small diesel / biodiesel electric hybrid for short journeys, and a larger petrol /CNG conversion for larger loads or longer journeys. That would give me a choice of 5 fuels, 2 or them potentially renewable.

Unfortunately nobody makes either of these vehicles at present.

Fascinating graphics -- Kevin Phillips has been talking about this for years, but that graph of income distribution is the clearest I have ever seen.

My question -- is this strictly a human arrangement? What percentage of available sunlight and water is taken up by the dominant species in a mature forest, for example? Seems to me that a regenerating clear-cut is pretty "democratic" -- lots of species get a chance -- but by the time 300 years has passed, the Douglas Fir is the plutocrat and sucks up almost everything. There is a rich life in the forest, but they all exist in the shade, or in specialized niches in the canopy if they want any sunlight -- and they often live off each other.

Is that a model for a mature human society? Are we really different from trees?

So, the post indicates that a gasoline tax or the gasoline portion of a carbon tax would reduce consumption, but primarily in upper income groups, since he indicates that consumption is price inelastic in lower income groups. However, I don't think he really produces evidence to support that, in the absence of a graph specifically relating consumption to gasoline prices. But the post does suggest that a gas guzzler tax paid on sale and/or registration for late model vehicles would be more likely to affect the higher income consumers with a more elastic consumptio function than would a gas tax or mileage tax.

The period from about '65 through the '70s shows anomalously high per capita gasoline consumption, well above the trend line that otherwise could be drawn through the remaining data points. There were two factors that could account for this:

• During this period automatic transmissions generally replaced manuals, and air conditioning, power steering, and power brakes became standard in most cars.
• Air polution standards introduced in the '60s limited the percent polutants in the exhaust, and these regulations were complied with by increasing displacement to reduce the incomplete combustion due to cylinder wall effects and by retiming the engines for minimum emissions instead of efficiency.

These factors decreased MPG while increasing comfort and driveability, leading to the increased gas consumption. They were of great benefit to the oil companies, which were then at the peak of US domestic production. However, the government eventually realized that it had to do something and passed the fuel efficiency legislation.

The government's realization came with the '73 oil embargo. OPEC had been a toothless and ineffective organization for some years after its formation around 1960. However, by the early '70s there was concern that "friendly" regimes in the Middle East required more assistance in order to function as a bulwark against communism. Direct assistance would have been unpopular, both in the aftermath of the Vietnam War and due to the relationship with Israel. Strengthening OPEC would avoid problems with direct assistance by funneling money from US drivers through US oil companies to Iran and Saudi Arabia, which were in turn expected to buy US weapons and US goods to strengthen their economies. This plan failed to work very well, first because of the Arab members of OPEC boycotting the US in '73, and then the later crises when the Shah was overthrown in '79.

Therefore, the period in the data that shows the biggest shifts in key variables is not a period where economic forces are the only factor. Rather, it is a period where government policies exerted substantial influence over events.

Fitting the data != success. The danger in reading too much into the historical trends is the fact that there has been a huge shift in housing trends post 2008. To use the example of california, in the pre-2008 period, high house prices in Silicon Valley and Orange country caused people to buy cheap houses in tracy or riverside. Utility was a trade off between commute costs (gasoline) and mortgage payments. Those rules were vaporized by the mortgage crisis and increasing gas prices. It may take several years to stabilize but I think we are going to see more infill developments and clustering around better transit and slowing of building in the ex-burbs.

Will that lead to lower per capita consumption of gasoline? yes, in my opinion.

These key variables are gasoline consumption and prices, mileage, car efficiency, and income.

I propose adding house prices indexed by distance to population centers as a key variable.

Quite an interesting analysis.

I think there are a few variables not really addressed, however. Over the period studied the family and workforce composition has changed immensely. Sixty years ago there were more children per family (which is why it's called the Baby Boom) and often only one person in the family working outside the home. Most people did not go on to college after graduating from high school. Few of those who did go to college went on to graduate school. Today, there are fewer children per family, more single person households, and a many more high school graduates go to college, and many more college graduates go on to graduate school.

I don't know what differences these demographic changes have made to gasoline consumption, but surely it would be substantial. Much more commuting back and forth to college; two or more family members working in different directions; changes in retirement age . . .

Another point you (along with many others) overlook is that within American society the income groups are not static. Most wealth in America is not inherited. Bill Gates' father was an upper middle class lawyer; Warren Buffet's father was a middle class businessman; Paul Allen's father was a librarian; Larry Ellison was the child of an unwed teenager, given up for adoption at birth and raised in a small apartment. Sergey Brin's father is a mathematics professor, who arrived in the U.S. as a penniless immigrant.

And while the poor can become rich, the rich can also become poor. Their stories are usually less celebrated, and so harder to document. But is Bernie Madoff still rich? Or O.J. Simpson?

My personal experience supports this. My wife and I have been in the top 5% and in the bottom 5% (both more than once) within the last decade. Right now we are somewhere near the average. Last year a close family member, who barely made it out of high school and who has been clearly in the bottom 25% most of his life, made enough money to put him in the top 5%. He celebrated by buying a Corvette and a gold Rolex. My wife's widowed aunt, who (with her husband) were the "rich relatives" thirty years ago, lost her mobile home to foreclosure earlier this year.

One or two useful graphics, but otherwise an exercise in trivia. The whole thing presumes that automobiles exist, and, given that it's economics, that "consumers" demanded, rather than merely accepted, cars-first transportation. That's highly debatable and requires contact with historical evidence. None exists in this "model."

Second, the grand point here is that people will spend more money on gas if cars-first exists and incomes are rising? You need this model to make that point? Every 10-year-old knows that. It's trite.

Finally, why is this all US data? What happens when there is a serious public transportation or cycling/pedestrian infrastructure? Does this model work for Holland? Does it hold if you control for the automobile-intensity of the overall infrastructure even with the USA?

This is mental masturbation, and an insult to ordinary people. "Piggy principle?" More like ideological slop.

The social effects cannot be quantified unequivocally, but we cannot forget that in 2008, unlike 1979, there were no queues at gas stations and there was no rationing and so on. Above all, this was largely due to the fact that, facing a peak in prices, drivers were able to cut the unnecessary consumption of gasoline (for leisure trips, etc.), which would have never been reached with the 1979 engine efficiencies. Compared with 1979, in 2008 efficiencies increased by 33%.

I disagree with that. It would be my contention that reductions in consumption are related to unemployment and reduced economic activity. But I live in a rural environment, and reactions there are different from urban. Rural drivers drive very little "for the fun of it". More than 85% of my own travel is purely out of necessity, as in, to get to work or service customers or operate my business. The vehicle in my household that's used purely because we "just want to go somewhere" won't go more than 100 to 200 miles in a month for that purpose, whereas our "get to work" travel is more like 2500 miles each month. In rural areas, practically all businesses are small businesses, and many of them are 1-5 person businesses, with the bulk being 1 person businesses. These are often services that cover a large area. "reduction in travel" occurs directly in "lack of business".

Vast amounts of travel accumulated are for construction and service business purposes. In any given day, a large proportion of the vehicles moving on the road are contractors of various kinds (roofing, construction, windows, electrical, blah), and service rigs - you know, the kind that repairs your HVAC systems, plumbing, pest control, yard service, etc.

Those move directly in proportion to the amount of business they have, and during the slowdown, they do a LOT less than they did. I've directly asked my contractor and service business customers, and all have laid off employees and travel MUCH less than they did 4 years ago.

A reader who is unable to create an account from his computer wrote to me with a question:

"What in the world happened from 1966-1967 to Annual Per Capita Gasoline Consumption? It jumped 23% in that one year. Just curious, and am coming up blank on what happened, since all the other relevant info--to the post--increased smoothly in that period (from the other charts)."

The United States has not been a steady state economy since 1970 for two reasons. First, and most important, is that population has grown substantially over the past forty years. Second, median wage income has been pushed down by more and more compensation to employees being for medical insurance.

Also, real GDP is a heckuva lot more now than it was in 1970. Real GDP per capita has also grown a lot since 1970, but most of the benefit has gone to the top income quintile.

I received the following comment from Pedro A. Prieto, Vice president of ASPO Spain:

Using BP data, I have made a small table that shows some interesting things.

My first impression I am afraid time will prove out, is that when the oil flows increased every year, the rest of the fuels also were increasing. This even held true the first year that the oil fows decreased--still natural gas and coal, which are not yet in their peak, continued growing.

But after a second consecutive year of decreasing oil production, the lower oil production has affected the two other main fossil fuels, coal and gas, either directly or indirectly, and they have also reduced their production.

The direct cause could be the close interrelation among the fossil fuels, which is very asymmetric in favour of oil, which is responsible of more than 95 percent of the world transport, including all motorized activities of mining and the rest of machinery. The indirect cause, is that after the oil dwindles, there is no any possible economic growth, as energy and GDP are two expressions of the same thing: the economic activity requires energy. A very direct relation shown in the last IEA WEO 2009 (page 59 Primary Energy Demand and GDP, page 59). And with no economic growth, many things start fading, among them the financial world, that need economic growth to live; and the financial collapse leads, indirectly, to lower production in many things.

The graphic of the IEA shows the cynic clearly the why the concept of "energy intensity” was created. This invention is to wash some hands and minds and to prove that we can do more things (more GDP) with the same amount of energy, or to do the same things, with less energy. Although this is true for certain specific activities and/or countries, a top-down vision at global level and without prejudices, shows that if GDP grows, there is more energy consumption. If GDP grows, there is more pollution. That the GDP pollutes and the increase of GDP pollutes increasingly. The slope of the OECD (richer) countries is lower than that of the Non-OECD (poorer) countries. What this shows is not that rich countries are cleaner or sharper or smarter, but they are better in spoiling and pillaging alien resources via financial tricks and unjust commerce and by outsourcing the most polluting and more energy intensive and dirty activities, while keeping in the powerful countries the added value. Additionally, this permits to the richer countries to overlook poorer countries and accuse those who are polluting and consuming to produce shoes, T-shirts, and a myriad of consumer goods for us, of being dirty and intensive in energy consumption.

At the end, what prevails is the only one world, the green line of the IEA graphic; almost a straight line, clearly indicating to the HUMANS in general: ladies and gentleman, if you want more economic activity, you will have to consume more energy and pollute more. If global primary energy starts to fade or levels in a plateau, say bye, bye to economic growth.

We have to observe closely how the so called modern renewable energies have evolved. Even with their spectacular growth, especially in wind energy, their efforts and energy contributions to society could be greatly handicapped, if oil dwindles from year to year.

In the table above, the conventional energies fall 150.9 MToes in 2009, with respect to 2009. However, the new contributions of the modern renewables were 30.9 MToes. This is considering an average on the installed power (assuming that all this power has been working for one full year and considering 1,500 peak hours/year for solar installations and 2,000 hours/year for wind installations).This is 5 times less than the fall of fossil fuels in the same period.

If we consider that modern renewable energies are heavily subsidized and underpinned by a fossil fuelled society, if this society crashes, it is very probable that the renewable energies will follow, exactly like it is happening in Spain these days. Spain, with 20 GW of wind power and fourth country in the world, second in wind energy penetration and with 3.8 GW inn solar PV, second in the world and first in solar PV penetration, is debating today to cut, or kill the subsidies to renewable energies. And the government is even proposing retroactive changes, that will substantially decrease the subsidies already granted and approved, with respect to previous premium rates for renewable energies.

As somebody else has noted, in the Middle East oil production has fallen a 7.3 percent in 2009, but some countries like Saudi Arabia and Kuwait have fallen respecttively 10.6 and 11.3 percent. The obvious and main reason for Saudi Arabia is that its internal consumption increased some 9.8 percent. Still to be seen if it is only the domestic net energy to the service of the Saudis, or if it is, most likely, the increasing amounts of invested energy that Saudis need even to produce a 10.6 percent more.

In any case, we should never forget that subsidies, be they for an artificial ski slope in Dubai or in the form of premium tariffs for the modern renewables, are but a form of economic surplus of a fossil fuelled society. And economic surplus, as we can see from the IEA Graph, is a form of energy surplus, obviously coming mainly and fundamentally from the fossil fuels.

Interesting post, with quite a bit of truth to it.

There are some limitations with the model, as has been pointed out in the comments. I would emphasize three:

1. The assumption that the economy is composed of individual consumers, whose behavior determines energy consumption. In fact, industry, government and military are a huge chunk of the economy. Their behavior is rather different than that of individuals. I'm struck by Americans' blind spot in regards to the impact of our military; I'm not sure why Marco overlooks it. Here's a recent article summarizing its role: Call the Politburo, We’re in Trouble .

2. The particular variables chosen (income, gas prices, etc.) do not explicitly take structures into account. Commenters have pointed out the lack of good mass transit in the US and the long commutes required of workers. By overlooking structure, the model provides little guidance as to what structural change would be beneficial.

3. The "per capita" approach becomes problematic with highly skewed populations. Within the United States, income and assets are concentrated in the upper brackets. Even more so for the world as a whole.

Pace WebHubbleTelescope, this skewing is not a natural law, but is a human construct. The differences in wealth/income vary tremendously between societies and historical periods. Within my lifetime, the polarization in the US has dramatically increased from the somewhat egalitarian 50s.

WebHubbleTelescope says that it would take energy to change the inequality. I would counter that a large portion of our society's wealth is spent maintaining the inequality, through the police & military, public relations, corruption, lobbying, etc.

Bart / EB

In Switzerland, all the measures listed below have risen steadily, together, in gentle or steep (depending on your pov) slopes upwards without bumps - with a few trivial exceptions, such as the costs of plane trips which vary.

The statistical and rather brief precis linked is in French and only takes off in 1995, but these trends are historical. After all car use in 1920 was zero.

GDP per capita

Traveller (private, not goods) kms

> 61% increase motorised traffic 1970-2006

> 23% increase since 1995

> 2005: 45 % trips are leisure trips, since then 50% in many places (not in the linked text.)

Price of traveller km (all transport)

Number of motor vehicles (includes SUVS, motorbikes) per household:

> in 2005 20% have = 0

> at present, more than one car for one citizen

> in *absolute motor vehicle nos*, not per household, increased more than 50% (!) since 1980 (pop growth to be figured in.)

Length of roads, and land area devoted to transport. (Often left aside.)

HP of cars

> recent data does show a tiny dip, not in the linked text, concurrently with weight of cars (ditto), and presumably their size.

-----------

If you scroll to the bottom of page 17 you can see that public transport (train, tram, bus, trolley, boat, cable car, etc.) accounts for only a small %, 17 - 20% at the very most in 1970 and then sinking, of personal traveller kms; that the line is almost flat; and that personal car use has exploded from 1970 on.

CH is often cited as having fantastic public transport. I think that reputation is deserved, one can indeed travel all about (with some planning), and do quick, easy commutes, and the price is affordable as it is very heavily subsidized, specially for all those who cannot stretch to a car: students, oldies, and in some cantons the ‘working poor’, etc.

My young relative, as a student, has a 50% discount on train trips, at a one time cost of 110 dollars a year (about), and can travel for free between 19.00 and 6.00 or 7.00 - that is to make the bad/early/late/commutes free of charge, so that students are not penalized or prevented from studying. Or that they can go on rave parties to Zurich!

The geography and terrain of CH is very arduous, with corridors of communication between mountains, long commutes, etc. Public transport is (mostly) on time, clean, until recently very pleasant to travel in. It basically runs on electricity (nuclear, hydro) and diesel for country buses.

The Swiss love their public transport.

But they don’t use it, when they can afford a car, they give it up.

Leasing and hiring and ‘mobility’ car cos. have also seen to it that status wise, hire a nice a car for the w-end is super-cool.

Now let me come to the point: in the picture painted for CH, the efficiency in energy use, or cost of personal transport is not a factor. It is not figured into Gvmt. analyses, at all (see link) and they are quite right not to include it.

If a car can be paid for, gas can be paid for, that is it. Not one single person I know complained of high gas prices when it spiked.. rising GDP > rising no. of cars, some of them monstrous SUVS. India and China, to mention just those, are, at a different level in a similar situation. Ppl don’t care about the price of gas (or their expenditure on the car as a whole beyond the first buy of the shiny carcass) if they figure they can pay for it, or can get rid of the expense easily if they decide to.

Economic development leads to more cars. Less cars only comes about in extremely bad down-turns, political crack-down or deprivation (how many cars in Gaza and where can they go?), hyper severe Gvmt. regs. or just general chaos, such as war.

http://www.bfs.admin.ch/bfs/portal/fr/index/news/publikationen.Document....

Am I missing something?

It would seem obvious that the stagnation in average wages since the 1970's was caused by the enormous increase in the % of women who work. Average household wages are what's important, and they've gone up almost as quickly as overall GDP.

I kept expecting women's labor force participation to be mentioned, either in the article or the comments. It looks to me like the correlation between average wages and average gasoline consumption is spurious - a false correlation, caused by coincidence.