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From this month’s issue:
We know that GDP is a less than perfect measure of a country’s economic performance. We also know that GDP transforms over time, moving from capital intensive manufacturing to intellectual and digital goods. This is why energy consumption can both instruct, but also mislead, when hunting for clues in the economy. That said, global oil consumption in 2014 according to IEA Paris rose just 710 thousand barrels per day, or about 0.77%. BP Statistical Review Data concurs: global oil consumption grew just 0.76% last year. (It should be noted these growth rates are much lower than agency forecasts produced throughout 2014). Closer inspection reveals that US oil demand has never recovered—but has stabilized at lower levels—since the high consumption years of last decade. Despite this, the US has grown GDP roughly from 13 to 17 trillion over the past decade. It’s the position of TerraJoule.us that the best framework to understand this achievement is through the lens of energy transition. The US is using 1) less total energy, and 2) shifting to the powergrid, as part of a large and new pursuit of natural gas and wind and solar. And there’s at least some evidence that the US is being paid dividends for this transition. While the US will once again not come anywhere close to achieving the FED’s inflation target of 2%, job gains run at a steady pace, and there’s some early indication the labor market is starting to tighten. This may sound underwhelming, but vs. the world the US truly stands out.