Thursday, October 27, 2011

Uncle Sam Slims Down Energy Consumption

Has America structurally lowered its energy consumption? Or are recent declines in total energy consumption temporary, driven by transitory economic difficulties? Energy executives with profit and loss responsibility in particular should focus on these questions for few things drive revenues more than sales.

No matter the cause, the US declines are significant, with 2011 consumption rolling back to about 2000 levels. Importantly the US trend is counter the global trend. US and European energy consumption is flattening or declining, while global demand rises fueled by large increases in China, India, and the developing world

I am in the camp that falling US energy consumption and declining oil consumption reflect powerful structural changes in the US energy marketplace that will be sustained for the next 10 years at least. I include in that structural change gasoline prices over $3 per gallon, increasing fuel substitutes for oil, and major initiatives that are making vehicles, businesses, institutions, homes, and individuals use energy much more efficiently.

Examples of these structural changes abound. Last week, the New York Public Service Commission reauthorized New York's Energy Efficiency Portfolio Standard. Then 32 founding colleges began a $1 billion revolving loan fund and challenge to finance energy efficiency projects at higher education institutions.

New York will reduce electricity consumption in 2012 by the equivalent of 200,000 homes and gas demand by an amount equal to 400,000 homes.  It is all part of its effort to cut electricity usage by 15% by 2015.

Gasoline sales are down again in 2011 when compared to 2010 as consumers manage $3 plus gasoline by buying more fuel efficient vehicles or other means.

Meanwhile US GDP and population are much larger than in 2000. The country has 30 million more people for example. But energy consumption is below 2000 levels.

Appliance standards, lighting standards, rising fuel efficiency standards, green buildings taking off, hundreds of major energy efficiency programs, higher gasoline prices all add up to a big structural change in energy consumption.

Uncle Sam is on an energy diet.

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