Phantom Efficiencies: US Economy Still Running Very Slow

[phantom power]

Now, there is a popular myth that has grown up in the past two decades the the US economy already transformed itself. This received wisdom holds that GDP rose while energy consumption per unit of GDP fell. That is certainly true in the narrow sense. But, not true in the broader sense. Here’s why: US domestic energy consumption which at one time was devoted to industrial production here in the US, is now simply offshored to Asia. The US economy still demands large units of energy which we simply import through manufactured goods. Worse, US GDP accounting still overweights consumption. This makes for a perverse, energy-accounting outcome: the more we offshore energy-consuming manufacturing to other countries, the more distorted our energy efficiency claims become, against GDP.

The notion that the US economy therefore is much less sensitive to energy shocks is also, therefore, a myth. We simply take the shock globally now, instead of acutely through our domestic manufacturing base (or what’s left of it.). Now that China has certainly passed through its first Lewis Turning Point, the Asian giant’s ability to combine cheap labor with cheap energy to produce its beloved and ruthlessly competitive manufacturing arbitrage is going to dissipate. Energy analyst Jeff Rubin has been discussing the inevitability of this turning point for several years.

http://gregor.us/coal/phantom-efficiencies-us-economy-still-running-very-slow/