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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Why Energy Demand Is Plummeting In The U.S.

All the way back in April (which may as well be years ago at the rate that the news cycle is moving these days) Oilprice reported that in the throes of the novel coronavirus pandemic, which had relatively recently washed over the United States, had caused the nation’s energy consumption to fall to a stunning 16-year low.  According to NPR’s Planet Money podcast, which reported on this statistic at the time, this was a figure that was a particularly good indicator of just how badly the domestic economy was doing. ““How much electricity the country uses tends to match how much the economy is growing or shrinking really closely,” said Cardiff Garcia, one of the show’s hosts, on the April 13 Indicator podcast. “It can tell us how much worse the economy is getting in real-time, and it should also tell us when the economy has started to recover.” 

But now, as it turns out, a 16-year low was nothing. No big whoop. Chump change. This week, Fox Business, in a collaborative report with the Associated Press reported that the United States’ nationwide energy consumption  actually dipped to an incredible more-than 30-year low earlier this year. “The drop was driven by less demand for coal that is burned for electricity and oil that’s refined into gasoline and jet fuel, the U.S. Energy Information Administration said,” as paraphrased by Fox Business. “That’s the lowest monthly level since 1989 and the largest decrease ever recorded in data that’s been collected since 1973.”

Prior to the economic devastation and drop in energy demand wrought by the COVID-19 pandemic, the largest drop in United States history was recorded in December 2001, “after the Sept. 11 attacks shocked the economy and a mild winter depressed electricity demand”.

Related: Economic Turmoil Leaves Oil Trapped At $40

The quantity of electricity consumed what’s not the only energy metric that saw drastic change this spring; the way that people used energy also saw a huge transformation. “In South Korea, Italy, and Seattle telework and residential internet usage have soared 40% in just weeks,” tallied a Forbes report released toward the beginning of the pandemic in February. “In France 80% of internet traffic is now Facebook, YouTube, and Netflix, and providers are pledging to ensure ‘digital discipline.’” 

While telecommuting is not a new invention, and a full 24 percent of the U.S. workforce worked from home in the last year, “coronavirus isolation has already boosted that, and could be a watershed event for digital connecting,” Forbes wrote. As Oilprice reported at the time, “these new legions of telecommuters, their tablet-happy toddlers, and kids adjusting to attending school online are eating up huge amounts of bandwidth. This translates to a lot of families around the world ponying up a lot of money for their internet package and electricity bills as we head into what is certain to be a particularly brutal recession.”

And that’s just one half of an equation, and the other side isn’t looking great either. While business owners are celebrating having the cost of keeping the lights on taken off their hands, “After the virus clears and we’re left with a recession, landlords may have a hard time convincing corporate tenants to keep paying pricey overhead for employees who still got the work done, remotely,” says Forbes. “It can cost $20,000, according to JLL, to kit out the average 150 square feet of office space per worker. And, depending on your city, $300 or more per employee per month for rent, plus $50 per employee per month in supplies and snacks, and $20 per month to keep the lights on, air-conditioned and computers charged.”

But no matter who is footing the bill, the energy industry is losing out in the end. Energy demand is down--WAY down--and it’s taking hundreds of thousands of jobs along with it. Of course, energy demand will inevitably rebound, but the question is whether the source of energy will look the same in the future. While death knells are sounding for global coal and U.S. shale, many world leaders, from both the public and private sector, are pushing for investment into green energy as the more stable energy sector of the future. 

By Haley Zaremba for Oilprice.com 

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Leave a comment
  • Mamdouh Salameh on August 02 2020 said:
    A very simple answer is because the US economy crashed by 32.9% annually in the second quarter of 2020 triggered by the COVID-19 pandemic whose destructive power has been worse than that of the Great Depression of 1929.

    The pandemic proved irrevocably how inseparable the global economy and energy are. Destroy one you destroy the other and vice versa.

    Global oil demand will probably be back to pre-pandemic levels sometime during the 2021 or early 2022 depending on how fast major economies return to normality. China’s rebound is a lesson for the world to learn from.

    Working from home isn’t new. However, the pandemic forced it on more of us. Once it is over, many people will go back to work in offices and many others may decide that the way forward for them is to continue working from the comfort of their homes. Either way, they will need energy to drive the economy.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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