NCPA - National Center for Policy Analysis

Energy Is Everywhere

November 6, 2012

Many people assume that energy costs are only those that you have to pay for directly, such as monthly electricity, gas bills, gasoline and so forth. But people also pay for energy that they consume indirectly; that is, in the goods and services they consume, says Kenneth P. Green, a resident scholar at the American Enterprise Institute.

  • The average household spent $1,800 on non-transportation related energy use in 2005.
  • Of that, about $1,122 was spent on electricity, $471 on natural gas and $115 on fuel oil.
  • However, nearly half (46 percent) of energy related costs are indirect, meaning they are embodied in various goods or services.

Health care happens to be the highest single percentage of indirect energy consumption at around 27.5 percent. Within health care, nearly 47 percent of the indirect energy consumed involves the preparation of pharmaceuticals. After that, physician services constitute about 18.5 percent of the indirect energy use. Health care's impact on indirect energy use is projected to increase as more people will be required to get insurance and have access to more health related services.

After health care, food comprises the second highest indirect energy use at 23.7 percent. Processing larger animals, for example, is inefficient because less energy is gained than what was used to process the meat. That is why many people are turning to vegetarianism and even "locavorism," which involves the use of locally produced food.

Indirect energy prices disproportionally effect poorer populations. Low-income families have to spend a higher proportion of their money on energy related costs, which leaves less income available to spend on other goods and services. The poorest populations in the United States pay the highest percentage of their income on indirect energy (5 percent) while the rich only have to pay 1.3 percent of their income.

Source: Kenneth P. Green, "Energy is Everywhere," The American, October 24, 2012.


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