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September 2008

The metric Disposable Energy was created to combine these graphs used to brief staffs for Senators McCain and Obama in July 2008:

The oil supply stopped growing in May 2005 and the economy started losing momentum. Shortly thereafter, gas prices started climbing. More and more people were forced to choose between paying for their commute and the home.

This DOE graph (not updated since 2004) is a great illustration of interaction between oil and paychecks. The dark blue line is steadily increasing disposable income. The red line is oil prices. The gap in the 1990's allowed people to risk their life's savings to buy a house. Since oil supplies stopped growing in May 2005, prices shot up to squeeze more and more people into foreclosure.

The $2,000 a year decrease in disposable income between 2000-2006 matches climbing foreclosures. When gasoline was at $3.50 CNBC: Missing $4,155? It Went Into Your Gas Tank This Year (2011). High gas prices are even bad for oil companies. Gas prices collapsed from $4.11 in July 2008 to $1.75 in December 2008.  

Warnings and costs:

The metric Disposable Energy track how much energy people can buy with their take-home pay, how much energy they have to pursue happiness. Here is a comparison of GDP (blue line) with Disposable Energy (red). In the approach to the 2008 Great Recession, GDP gave no warning. Dispoable Energy was warning since 1998.


Unemployment is hightly correlated with gasoline prices 18 months prior. Life requires energy. Less affordable energy, less life:


With China and India becoming competitors for foreign oil in 1998, gasoline prices began to rise. Those who "drove to qualify" to buy houses saw their disposable income decrease by $2,000 to $4,500 (CNBC: Missing $4,155? It Went Into Your Gas Tank This Year, gas was $3.50). Forced to choose between keeping their job and sacrificing their home, people used mortgage payments to buy gas for their commute. The momentum in the economic fly wheel decreased until it nealy collapsed in Sept 2008.

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