Thursday, April 18, 2013

Shock Fact: EIA Projects US Per Capita Energy Use Will Fall To 1963 Levels

America's energy marketplace is undergoing incredible change in its demand side.  The just released EIA 2013 Annual Energy Outlook drives home this important reality.

The most shocking finding in the EIA 2013 Annual Energy Outlook is its projection that each American will use less and less energy from 2011 to 2040.  Indeed, EIA projects in its reference case that per capita American energy use will fall back to 1963 levels by 2040.  That really is back to the future when no computers, big screen televisions as well as no hybrid cars and LED lighting existed.  Stunning if accurate!

How reasonable is EIA's shocking finding that Americans are hurtling back to 1963 in per capita energy use? EIA's projection assumes annual real GDP growth of 2.5% and population growth of 0.9% or adding about 3 million Americans per year over the forecast period.  Both are conventional forecast numbers, though the GDP growth number is above current levels.

EIA is forecasting a much slower rate of annual energy growth--just 0.3%--than had been the case in the prior 25 years. The much slower rate of annual energy growth rests significantly on increasing energy efficiency in appliances and vehicles that will be required by already enacted federal laws.

The combination of a much slower rate of annual energy growth and continuing significant population growth of 0.9% per year produces a sharply lower projected per capita energy consumption. The biggest risk of error in this forecast may rest in the population growth number. Slower population growth would decrease further the rate of annual energy growth but also could drive up the per capita energy growth number.

The big picture points of the EIA projection--falling per capita American energy use and much slower growth in total energy use than had been the case over the previous 25 years--has a high probability of being correct. America's energy marketplace is indeed undergoing incredible change on its demand side.

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