1 00:00:00,012 --> 00:00:05,916 Okay, welcome back to Energy 101. we're talking about energy and society 2 00:00:05,916 --> 00:00:11,537 and how society and energy is coupled and why society likes to use energy. 3 00:00:11,537 --> 00:00:16,470 And today we're going to focus on, well, energy and the economy. 4 00:00:16,470 --> 00:00:22,582 How's the economy is affected by energy or energy consumption is affected by the 5 00:00:22,582 --> 00:00:26,858 economy. the, we're reminding ourselves that, of 6 00:00:26,858 --> 00:00:32,651 the flow, the energy flow in society where the society use is the, the tail 7 00:00:32,651 --> 00:00:39,148 that wags the dog that creates the need to use the earth's natural resources and 8 00:00:39,148 --> 00:00:44,327 then convert that energy into the form. That society wants. 9 00:00:44,327 --> 00:00:52,037 The linkage between energy use and the economy has been studied and is fairly 10 00:00:52,037 --> 00:00:58,572 clear in the literature. What this graph shows is the change from 11 00:00:58,572 --> 00:01:03,872 the previous year of energy use, which is the blue. 12 00:01:03,872 --> 00:01:10,830 is energy used which is the red line, excuse me, and the gross domestic product 13 00:01:10,830 --> 00:01:16,581 in the US which is the blue line and, from 2000 and 2009, it shows the, the 14 00:01:16,581 --> 00:01:22,424 change in energy consumption and the change in the economy measured by the 15 00:01:22,424 --> 00:01:25,798 gross domestic product from the prior year. 16 00:01:25,798 --> 00:01:31,061 Is it just from the prior year. So you see from 2000 to 2001, there was a 17 00:01:31,061 --> 00:01:36,787 drop in the gross domestic product, because we were dealing with a recession 18 00:01:36,787 --> 00:01:42,193 then, and a slow down of the economy. And then there was a growth up until 19 00:01:42,193 --> 00:01:45,744 about 2004, and the GDP majored on the blue line 20 00:01:45,744 --> 00:01:49,222 there and energy consumption increased also. 21 00:01:49,222 --> 00:01:55,835 then it started declining and it fell off the curve in 2008 when we had a major 22 00:01:55,835 --> 00:02:01,901 recession, which dropped the economy into a recession and dropped energy 23 00:02:01,901 --> 00:02:07,756 consumption into a recession. Both numbers going negative compared to 24 00:02:07,756 --> 00:02:14,475 the previous year's use. So we could look at many, many types of correlations like 25 00:02:14,475 --> 00:02:19,834 this, but if you look at the literature, you'll find that there's an 26 00:02:19,834 --> 00:02:26,414 indistinguishable linkage between energy consumption and GDP, not just in the US, 27 00:02:26,414 --> 00:02:29,832 but worldwide and we'll see that later on. 28 00:02:29,832 --> 00:02:36,534 Another connection in between the economy and energy consumption is that when 29 00:02:36,534 --> 00:02:42,412 energy demand decreases worldwide then the energy price decreases. 30 00:02:42,412 --> 00:02:49,037 We could say the flip side of that also. And talk about the fact that an increase 31 00:02:49,037 --> 00:02:52,942 energy ban world wide increases energy price. 32 00:02:52,942 --> 00:02:56,992 But let's look at the energy price history here. 33 00:02:56,992 --> 00:03:03,207 From 1986 over to 2012. this is oil price in particular and we're 34 00:03:03,207 --> 00:03:08,362 looking at the demand for oil and the, over this period. 35 00:03:08,362 --> 00:03:15,582 and what the economy was doing. you see the big spike there in 2008 when 36 00:03:15,582 --> 00:03:21,882 oil reached as high as $150 a barrel. A barrel of oil is 42 gallons. 37 00:03:21,882 --> 00:03:26,827 That's crude oil. And here it shows it at about 130. 38 00:03:26,827 --> 00:03:33,692 But the difference between that is that 130 is an average over the year. 39 00:03:33,692 --> 00:03:40,717 So it's a, we saw that it peaked. And that declined very rapidly from 2007 40 00:03:40,717 --> 00:03:43,362 up to 2008. And we see that. 41 00:03:43,362 --> 00:03:49,055 the price increased dramatically. As soon as the major recession came in 42 00:03:49,055 --> 00:03:55,175 2008, you can see the price absolutely plunged from an average of $130 a barrel 43 00:03:55,175 --> 00:03:59,937 all the way down to $40 a barrel.That's a factor of Three drop. 44 00:03:59,937 --> 00:04:05,329 And you notice the, the price drops faster than it rises, because the economy 45 00:04:05,329 --> 00:04:10,150 generally changes faster on the down side than it does on the up side. 46 00:04:10,150 --> 00:04:15,116 We can it's easy to have the The economy fall off a cliff is a little more 47 00:04:15,116 --> 00:04:19,819 difficult to grow it, and climb, climb back up the mountain, takes a little 48 00:04:19,819 --> 00:04:23,500 longer. But there's a distinct relationship there 49 00:04:23,500 --> 00:04:28,366 and it takes a while for people to slow down their oil production, so if you put 50 00:04:28,366 --> 00:04:32,804 a surplus of oil out there And everybody's tanks are full, and nobody 51 00:04:32,804 --> 00:04:37,884 has anywhere to put it, and nobody's using it, then the price effectively goes 52 00:04:37,884 --> 00:04:41,427 almost to zero. If you put out a barrel of oil for sale, 53 00:04:41,427 --> 00:04:46,637 and nobody's got a need for it or a place to store it Then the value goes down 54 00:04:46,637 --> 00:04:50,265 dramatically, and that's what happened in 2008. 55 00:04:50,265 --> 00:04:56,185 It has since climbed back up, and it's about $80 or $90 at this point in time. 56 00:04:56,185 --> 00:05:02,132 So, we see a linkage between the price of energy, in this particular case, oil. 57 00:05:02,132 --> 00:05:07,517 Which is more volatile than other forms of energy and the economy. 58 00:05:07,517 --> 00:05:14,499 if you look at the developing countries, the, let's look at national standards of 59 00:05:14,499 --> 00:05:18,429 living. the standard of living is something 60 00:05:18,429 --> 00:05:24,588 that's difficult to get a quantitative measure on but the Per universal major 61 00:05:24,588 --> 00:05:29,669 that is used is the gross domestic product that we looked at earlier. 62 00:05:29,669 --> 00:05:35,663 And if you improved the gross domestic product, people generally accept that you 63 00:05:35,663 --> 00:05:41,109 improve the standard of living. Because you're producing more goods with 64 00:05:41,109 --> 00:05:46,082 the same number of people. And if you raise everybody's standard of 65 00:05:46,082 --> 00:05:50,377 living on the average. But we'll see that it also increases 66 00:05:50,377 --> 00:05:54,352 energy consumption. There's a linkage between standard of 67 00:05:54,352 --> 00:05:58,877 living measured by gross domestic product and energy consumption. 68 00:05:58,877 --> 00:06:02,377 So let's look at some, some quantitative data here. 69 00:06:02,377 --> 00:06:07,777 This is a plot on the vertical scale that shows gross domestic product per capita 70 00:06:07,777 --> 00:06:11,562 and there's plotted on that graph several countries. 71 00:06:11,562 --> 00:06:16,312 Along the horizontal axis, it's the energy used per capita. 72 00:06:16,312 --> 00:06:22,205 So we are plotting the energy, the gross domestic product per capita on the 73 00:06:22,205 --> 00:06:25,876 vertical scale versus energy used per capita. 74 00:06:25,876 --> 00:06:30,732 And start off with the US all way up to the right hand corner. 75 00:06:30,732 --> 00:06:33,589 U.S. is up at the right hand corner using 76 00:06:33,589 --> 00:06:38,521 about 7 units of energy per capita. And the gross domestic product per 77 00:06:38,521 --> 00:06:43,715 capita, which is a measure of the standard of living, a good quantitative 78 00:06:43,715 --> 00:06:48,298 measure, is about 37. if we move over to the left, you can see 79 00:06:48,298 --> 00:06:53,442 [INAUDIBLE] is up almost equal to our gross domestic product per capita. 80 00:06:53,442 --> 00:06:56,682 But they are using it much more efficiently. 81 00:06:56,682 --> 00:07:02,636 but generally, as you move to lower energy use per capita, the standard of 82 00:07:02,636 --> 00:07:07,211 living, measured by the gross domestic product, declines. 83 00:07:07,211 --> 00:07:12,901 You move on down, you see France. Is down about 25 gross domestic product 84 00:07:12,901 --> 00:07:17,413 dollars per capita, and their energy consumption is about four. 85 00:07:17,413 --> 00:07:22,724 Saudi Arabia, I put that one on there to show, that, they're using a lot more 86 00:07:22,724 --> 00:07:26,991 energy than they're Economy indicates, or economic activity. 87 00:07:26,991 --> 00:07:30,745 But they, one reason is, is they have very cheap energy. 88 00:07:30,745 --> 00:07:34,054 They produced it and they've got a lot of surplus. 89 00:07:34,054 --> 00:07:38,449 And it's a major export. And they supply it through their citizens 90 00:07:38,449 --> 00:07:43,137 in a very subsidized manner. So that was a little bit off the chart 91 00:07:43,137 --> 00:07:48,614 but if you take that one off the chart which is an outlier, then you can see a 92 00:07:48,614 --> 00:07:52,686 good correlation. Let's move all the way down to China. 93 00:07:52,686 --> 00:07:58,112 You see that China is a devloping nation and it's down about 1 and 3 quarter 94 00:07:58,112 --> 00:08:02,396 Energy used per capita. And with about a 10 gross domestic 95 00:08:02,396 --> 00:08:05,850 product per capita. If they were to rise to it. 96 00:08:05,850 --> 00:08:11,056 Now, remember, this is per capita. If they were r-, were to rise to our 97 00:08:11,056 --> 00:08:16,087 standard of living, measured by gross domestic product per capita. 98 00:08:16,087 --> 00:08:20,527 Then, their energy use would go up. To around, 6 or so. 99 00:08:20,527 --> 00:08:23,988 So it would go up about a factor of 3 or 4. 100 00:08:23,988 --> 00:08:28,944 And, but the, you've got to remember, this is per capita. 101 00:08:28,944 --> 00:08:33,483 They have three times more people than we have in the U.S. 102 00:08:33,483 --> 00:08:38,852 And, so, their energy consumption would far outscale ours. 103 00:08:38,852 --> 00:08:43,787 And that's one thing that frightens people, is that look at China and see 104 00:08:43,787 --> 00:08:48,672 them climbing up this energy use per capita line correlation as they are 105 00:08:48,672 --> 00:08:54,266 trying to improve the standard of living for their citizens, and the implications 106 00:08:54,266 --> 00:08:57,433 on Worldwide energy supply and the resource. 107 00:08:57,433 --> 00:09:01,886 you, you move on down. India's another one you hear about as a 108 00:09:01,886 --> 00:09:07,150 developing nation, is down all the way down in the left bottom corner but this 109 00:09:07,150 --> 00:09:12,165 shows that the standard of living. Measured by the gross domestic product 110 00:09:12,165 --> 00:09:16,299 per capita is closely correlated with the energy use per capita. 111 00:09:16,299 --> 00:09:21,389 So if you want to move up the ladder to a better standard of living in any of these 112 00:09:21,389 --> 00:09:26,333 countries, including our own, then you would means, that you're going to use 113 00:09:26,333 --> 00:09:32,174 more energy per capita. So what were seeing here, is a linkage 114 00:09:32,174 --> 00:09:41,083 between, in society, between the economy and energy use, and this will conclude 115 00:09:41,083 --> 00:09:45,482 our Our subtitle section under society and energy. 116 00:09:45,482 --> 00:09:51,952 And we'll move down next time to where we get this energy from in the next module 117 00:09:51,952 --> 00:09:56,834 from the natural energy flow. where are we getting it from. 118 00:09:56,834 --> 00:10:04,570 Where is the energy coming from that we're using today? Thank you.