EME 801
Energy Markets, Policy, and Regulation

The Importance of Energy to the Economy, the Environment, and the World

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The Importance of Energy to the Economy, the Environment, and the World

The Economy

As we walk through our daily lives, it becomes very easy to take for granted the almost complete dependence we have, as humans in a post-industrial economy, on the incredible supply of inexpensive and convertible energy. If we live in anything other than a tropical climate, we require heating so that we don’t freeze. We use energy to till our fields and harvest our food. We also use energy to provide light during non-daylight hours as well as power machines that allow for inexpensive manufactures such as clothing and other household items. We move about, except when walking or bicycling, through the conversion of some sort of potential energy into the kinetic energy of the plane, train, automobile, or boat. And finally, we use energy to communicate and store and manipulate data. This vast network of comfort, nourishment, nutrition, transportation and information would be utterly impossible without inexpensive and readily dispatchable energy. It is literally the life’s blood of the entire economic system.

The resemblance between the human circulatory system and the natural gas grid (or the electric transmission and distribution grid) is similar, and the energy delivery system is almost as crucial to the economy as the circulatory system is to the human.

Schematic of the human circulatory system
Figure 1.1: The human circulatory system
Natural gas pipelines in the US
Figure 1.2: Map of U.S. interstate and intrastate natural gas pipelines
Credit: Map of U.S. interstate and intrastate natural gas pipelines. U.S. Energy Information Administration, Natural Gas Explained (Public Domain). For an accessible version contact EIA.

This chart shows the dependence on energy of various economies around the world. This is directly showing Tons of Oil equivalent to make $1,000 of GDP. A tonne of oil is equivalent to 7.44 barrels or 11,630 kWh. The implications are massive. Every 1,000 dollars of GDP in the US has at least 1 MWh or almost a barrel of oil embedded in it. More importantly, this offers no quantification of the risk to the economy should this energy supply be disrupted. Then the energy intensity would increase massively and whole supply chains and communication networks would be disrupted.

See image caption and text below image. See link in caption for text description.
Figure 1.3: Total energy supply per unit of GDP for selected countries and regions, 2000-2020
Click for a text description of this image.
Total energy supply per unit of GDP for selected countries and regions, 2000-2020
USA India World China EU
2000 0.165 0.153 0.152 0.244 0.106
2001 0.161 0.148 0.149 0.233 0.106
2002 0.16 0.147 0.149 0.228 0.105
2003 0.156 0.14 0.148 0.237 0.106
2004 0.153 0.137 0.147 0.244 0.105
2005 0.149 0.132 0.145 0.242 0.103
2006 0.143 0.129 0.142 0.235 0.1
2007 0.143 0.127 0.138 0.222 0.095
2008 0.139 0.13 0.136 0.209 0.094
2009 0.136 0.131 0.136 0.204 0.093
2010 0.136 0.128 0.136 0.204 0.095
2011 0.132 0.126 0.133 0.2 0.09
2012 0.127 0.126 0.131 0.192 0.09
2013 0.127 0.122 0.128 0.184 0.089
2014 0.125 0.121 0.126 0.176 0.084
2015 0.12 0.115 0.122 0.165 0.083
2016 0.117 0.108 0.119 0.154 0.082
2017 0.114 0.106 0.117 0.15 0.081
2018 0.113 0.105 0.116 0.147 0.078
2019 0.111 0.101 0.114 0.145 0.076
2020 0.106 -- -- -- --