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Economic Perspectives, Vol. 29, 4th, No. 4, November 2005
Energy Markets and the Midwest Economy
The price and availability of energy has long been a critical concern to industrialized nations. In 2002, the industrialized nations as represented by the Organization for Economic Cooperation and Development (OECD) were responsible for consuming 61 percent of the world’s petroleum and 51 percent of the world’s natural gas. Higher prices have lead to concerns about the potential drag that energy costs might have on economic growth since the first oil embargo of the 1970s. For energy-intensive industries, high energy prices can be particularly destructive. Yet the recent disruptive impact of high energy prices appears to be muted as the U.S. economy has shifted to a service base and gains have been made in reducing the reliance on energy to produce U.S. output. Twenty-five years ago it took 15,000 Btu (British thermal units) to produce $1 gross domestic product (GDP). By 2003, this had fallen to 9,500 Btu, a decline of nearly 37 percent.
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