Energy Prices as share of consumer spending

[PeriodThree]

Interesting graph showing 'energy as a share of nominal consumer spending.' This is 'energy' not just gas, but I am sometimes casual in using one as a proxy for the other...

https://angrybear.blogspot.com/2008/...-consumer.html

It looks like for over 20 years we have been spending a lower and lower proportion of our money on energy.

I think this might help understand why demand for energy is relatively inelastic. Economic theory would suggest that we use less energy as the price goes up, but mostly that hasn't been true in the US (I did see the reported 1% year to year decrease in miles driven in April, or was it March?)

Some people argue that our inelastic demand for energy means that we are basically incapable of changing our consumption habits, and so peak oil triggered supply shortages will cause death, destruction, and doom.

Looking at these % of spending numbers offers a different way to understand our apparent inelastic consumption, and that is that mostly we are either trapped into using the energy, or we value what we get from using the energy more than the price.

When energy is a % of spending varies between 4-9% they do not seem to be highly linked with changes in consumption.

So the question gets flipped from 'how high does gas have to go before we change behavior?' to 'how high, as a percentage of consumer spending, does gas have to go before we change behavior?'

[Lenny]

You know, PT, you seem as smart as a whip, so I had to look up NOMINAL again in the dictionary and it turns out this article means nothing to me, as I don't understand it. Or if it did understand it, then it means that HE doesn't understand market economy. At $4.45/gallon, nearby, we've not reached our point yet but when we do, there WILL be new ways of commuting and transportation. Bottom line: we are spoiled and not hurting. I figure it will take about a year for this ripple to reach out through the economy, and then I pray there not be a rebounding ripple into tumble effect. Of course we will have a NEW and bright shiny savior by then and the evil G.W. will have all his evil nastiness gone, like the nasty evil nightmare he is.

[PeriodThree]

Lenny,

I posted a link to a small blog post with a graph showing energy prices as a percent of nominal consumer spending, the words in the post were pretty much mine.

The graph shows that consumer spending on energy, as a percentage of consumer spending, has gone up as high 9.3% and as low as 4.2%, and at the end of the first quarter of 2008 was 6.6%

I don't think anyone is particularly 'spoiled' here. If we are 'spoiled' than it implies that someone is indulging us, perhaps with lower than market rate energy.

I don't think anyone is spoiling us!

And I believe I understand the market economy quite well, so it probably means you just don't understand :-)

You know, PT, you seem as smart as a whip, so I had to look up NOMINAL again in the dictionary and it turns out this article means nothing to me, as I don't understand it. Or if it did understand it, then it means that HE doesn't understand market economy. At $4.45/gallon, nearby, we've not reached our point yet but when we do, there WILL be new ways of commuting and transportation. Bottom line: we are spoiled and not hurting. I figure it will take about a year for this ripple to reach out through the economy, and then I pray there not be a rebounding ripple into tumble effect. Of course we will have a NEW and bright shiny savior by then and the evil G.W. will have all his evil nastiness gone, like the nasty evil nightmare he is.

[Lenny]

Lenny,
I posted a link to a small blog post with a graph showing energy prices as a percent of nominal consumer spending, the words in the post were pretty much mine.
The graph shows that consumer spending on energy, as a percentage of consumer spending, has gone up as high 9.3% and as low as 4.2%, and at the end of the first quarter of 2008 was 6.6%
I don't think anyone is particularly 'spoiled' here. If we are 'spoiled' than it implies that someone is indulging us, perhaps with lower than market rate energy.
I don't think anyone is spoiling us!
And I believe I understand the market economy quite well, so it probably means you just don't understand :-)

You're right. I don't understand it. I don't know the elements that make up the chart. I understand the words, but not the means to derive the findings. Does that chart have the PG&E bill, as well as the cost of food in the store due to the energy that brought it there? The tie-in of gas prices to this chart is not 1:1, so what other elements make up this graph? And the word "nominal" still throws me. The elements that make up the "inelastic demand" for consumption habits (those plurals words throw me as well) vary depending on which habits we trade off, no? I understand that such is an aggregate of habits/behaviors so that consistency is maintained, but the shift among those elements give rise to interpretation as well. Isn't economics called "the dismal science"? and for good reason.
As for being spoiled, we simply are spoiling ourselves, no? Of course where I live, it may be not the case, but I see full parking lots at malls, restaurants, and movie theaters. Folks ain't walking none to much. And yes, I know the media keeps agitating, but then that is what they practice daily.
But thanks to you, I understand your post better.