Americans are now spending over $500 billion on energy goods and services, according to statistics produced by the Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce. These purchases range from gasoline in the car to electricity, natural gas or oil for the furnace, and propane for the grill. Following the significant rise in oil prices in the decade of the 2000s, U.S. consumers were hit with an ever larger energy bill. The chart below shows consumers’ energy spending since the early 1960s on a quarterly (Q) basis. These data are adjusted for seasonal swings in spending, and they are at an annual rate. You can find all of these data on the BEA website. The looks of this chart can be deceiving since it is not on a log scale. For example, average annual growth in energy spending was 3.4% since 2000, but over 6% during the 40 years prior to that. From an economic perspective, the level of spending as well as the growth rate are important for the consumer budget.
Average consumer spending on energy on a per person basis has been volatile at a high plateau in recent years. The next chart shows consumer spending per person since 1960. During the 1980s and 1990s, spending on energy averaged $869 per person. That nearly doubled to $1,655 since 2000. The most recent estimate is $1,709.
One of the key factors driving higher per capita energy spending has been the sea change in oil prices. Oil prices surged from the $20 per barrel range to a peak of $123 by the second quarter (Q2) of 2008. Oil prices have been very volatile since then, with significant movements both up and down. Even with this volatility, since 2004 oil prices have averaged $71, more than three times higher than the oil price average in the 1984-2003 period.
Energy is a big ticket item on the consumers’ budget. The following chart shows consumer spending on energy as a percent of total consumer spending. As of Q1 2019, this amount was 3.9%, one of the largest expenditure categories. But not the largest, especially given the cost of housing and health care. Estimates of household spending on health care is in the 8% range as seen in this careful study done a the Bureau of Labor Statistics. The consumers’ expenditure share for energy, however, is declining and that may be partly due to the rising trend in health care costs borne by consumers, especially given the rise in drug prices and the new possibilities that technology offer to improve health outcomes.
As for energy prices other than oil, the Energy Information Administration (EIA) at the U.S. Department of Energy also measures prices for all energy goods and services. EIA data on electricity rates for residential customers are shown in the orange line in the chart below for the period since 2002. During this 17 year period, residential electricity rates have increased at an average annual rate of 2.4%. This is also adding upward pressure to consumers’ purchases of energy goods and services.
Consumer spending on energy is over $500 billion as of Q1 2019. It represents nearly 4% of spending on all goods and services by consumers. Spending growth is averaging about 3.5% per year since 2000, with more volatility recently given the extreme movements in oil pricing. There has been a secular decline in the outlays for energy as a share of total consumer spending. This is partly due to other categories, such as health care, growing more rapidly. U.S. consumers may also be responding to these pressures through energy conservation and energy efficiency actions.