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Disposable Energy

Disposable Energy is how much energy people can buy with their take-home-pay.

Articles published on Disposable Energy:

Between 1998 and 2008, depleting US oil production caused gasoline prices to rise. US families lost between $2,000 and $4,155 

Summary

  • GDP barely indicated the Great Recession and gave no warning of its approach.
  • Disposable Energy is a forward looking metric of economic health and risk.
  • Disposable Energy is a simple metric every investor can adapt to their market.
  • Gasoline prices warn of problems and potentials a year in advance.

GDP is virtually useless as an investment or policy metric. It was created for the US Congress in 1934 to justify borrow, taxing, and consumption.

The following graph shows GDP in comparison with the metric Disposable Energy. GDP is nearly featureless. GDP fails to register the crisis of the 1973 Oil Embargo, 1979 Iranian Revolution, boom of the 1990s, and barely registers the near economic collapse of the Great Recession in 2008.

Disposable Energy is a simple metric of how much energy families can buy with their take-home-pay. This metric might be better refined, but in its current form it can be easily recreated by taking the price of gasoline and dividing it by the typical family's disposable income, then normalizing to 1986.

In contrast to featureless GDP, Disposable Energy indicated the boom of the 1990s starting with steady growth in 1982. Warnings of the 2008 crisis began in 1998.

The economy should be viewed as a flywheel:

  • As labor and energy are applied, economic momentum builds into the flywheel. As money is borrowed and spent, it buys labor applying energy to add to momentum.
  • As taxes confiscate the value of labor and add costs to energy to repay debts, energy becomes less affordable, resources deplete, and unemployment increases; moment of the flywheel decays.

This borrowing without repayment within 19years is a Tyranny of the Majority, a benefit to current voters at the expense of children, a defenseless non-voting minority.

GDP is a historical assessment of momentum, output. Disposable Energy is the current measure of inputs generating economic work.

 

Disposable Energy includes aspects of take-home-pay, taxes, unemployment, energy costs and other factors. A key component of input is the price of gasoline. Simply logging the price of gasoline provides a warning of problems and potential improving markets about 18 months in advance. In the following graph, unemployment is shifted one year earlier (light red line shows actual time). The price of gasoline is normalized to 2015 dollars.

The law of supply and demand will require gasoline prices to continue to rise. US Oil production is decreasing at the rate of about 1 million-barrels/day/year (mb/d/y), 1 Mb/d Oil Depletion Vs. EIA's Rosy Forecast. Gasoline prices are up 35% so far in 2016 and will rise much higher, much faster than the market is current priced at.

The "glut" of oil is not a glut, but a storage problem in a highly "just-in-time" industry. The TWIP reports of June 2016 underscore that "markets are wise". Despite difficult storage problems, as US oil production declines, buyers are buying foreign oil to compensate. If buyers thought there was a "glut", they would not burden themselves with additional costs of storing inventory. Buyers would let US inventories deplete. Markets aggregate insights.

As noted by Saudi Arabia and China, energy markets are shifting their nature,$100 Trillion Shift From 'Just-In-Time' To 'Just-In-Case'

Oil prices and gasoline prices will continue to ratchet higher, and at a faster rate, than is currently forecast by EIA. Buyers acting in the real market illustrate the willingness to pay for more "just-in-case" inventory.

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