Energy Independence and Government Policy

Every so often, the subject of energy independence becomes something to which people pay attention. Its usually when the price of gasoline goes up, and/or when the leader of Venezuela or Iran or whoever the latest incarnation of evil happens to be makes some stupid noises, and/or before someone gets invaded.

I would imagine a reasonable way to measure energy independence, at least in the short term, is through the ratio of energy produced (in the US) to the total amount of energy consumed in the US, both of which are measured in btu.

Back in 1949, the US produced 99.2% of all the energy it consumed. By 2005, that figure was about 69%. Thus, we’re not exactly becoming more independent, but rather less. This, um, progress(?) has been a bipartisan affair… the table below shows the annual change in the energy independence, by presidency, since Ike.


Now, you may be thinking… so what? Its not like the gubmint can do anything about energy consumption. Well… perhaps. But… consider the only President under whom there was a non-trivial increase in energy independence, Jimmy Carter. Sure, the increase was partly due to the free market making adaptations, Mr. Carter also used his bully pulpit to make Americans care about the issue. Consider the symbolic acts alone… Carter installed solar panels and a wood burning stove at the White House (removed almost immediately upon the arrival of St. Ronald the Reagan), wore sweaters, and even got attacked by a bunny. (I’m sure the rabbit thing is unrelated to energy independence, but its always fun to note.) But were any of the changes more than symbolic? Was there any walk behind the talk?

Spending on the DOE might be a good proxy for how much an administration cares about energy issues. Data on the government’s budget by department goes back to 1976… the annual percentage change (geometric) in real per capita spending on the DOE, and the annual change in the percentage of the total budget allocated to the DOE are shown below (data runs through 2005)

____per capita___share of budget

Carter increased real spending per capita on energy independence by more than any other President in the sample.

But… is there a relationship between the DOE budget and energy independence? Who knows? But I ran some correlations… the table below shows the correlation between energy independence in any given year, and the DOE’s share of the budget in a given year.

DOE’s share, t-x______Correlation with Energy Indep, Year t
X = 0___________________0.51
X = 1___________________0.60
X = 2___________________0.73
X = 3___________________0.81
X = 4___________________0.83
X = 5___________________0.80
X = 6___________________0.78

The table seems to indicate that the DOE’s budget is correlated with energy independence. It also seems to indicate that most of the bang for the buck comes around in the fourth year.

Similar results are obtained using the DOE’s real budget per capita. In addition, I looked at different types of energy produced… this correlation is very strong for production of crude oil and natural gas, but not for coal, nukeelar (is that how GW would spell it?) power, or renewable energy. For context… US output (in 2005), in billion btus:

Coal: 23 million
Crude: 10.8 million
Natural Gas: 21 million
Nuclear: 8.1 million
Renewable: 6.1 million

Energy Consumption
Energy Production
DOE as a share of total budget

Caveat to note… Energy consumption and production data in calendar years. DOE budget, population in fiscal years. Inflation calculated in fiscal years.

Correction – Corrected a hallucination about Reagan increasing spending on energy as a share of the budget.

Additional Note: I haven’t really thought through the idea of energy independence. I’m not sure its a good thing or not… I can certainly see pros and cons. In this post, I’m merely putting up the numbers to show what actually happened, not expressing an opinion about what should happen. That said, I wouldn’t mind hearing reader’s opinions about what should happen.

More corrections/comments…
1. Pct change in real spending per capita was computed incorrectly originally. Magnitudes changed a bit. Computed using geometric means to obtain the true annual percentage change. For example, for Carter… the annual percentage change was 9.87%. Then… Carter’s starting real spending per capita ($69.25) times (1.0987)^(4) = $100.91, which happens to be real spending per capita in 1980/
2. Using simple averages to compute changes in figures that are shown in percentage terms. For example, when computing the change in coal produced as a percentage of total energy produced… because that figure is already in percentage terms, for Carter’s term, I am simply taking the value for 1980, subtracting the 1976 value, and dividing by 4.