Energy Consumption and Living Standards

What is the connnection between living standards and

1) consumption of energy
2) consumption of goods?

Can energy consumption decrease yet living standards increase? What are "living standards" and how do you measure them?

It seems to me that commuting times are one factor in a "real" standard of living. The longer one sits in a car, the less one can spend either at work or with family and friends. The more (and further) you have to drive to do anything, like shop, get a haircut, or go out to eat, the lower one's living standard really is.

But perverse financial incentives have changed our urban landscape. Energy prices in America are artificially cheap. As Kevin Carson writes,

Right now, in the American economy, subsidized consumption of energy and transportation factors means that it's artificially cheap to buy stuff produced by a big factory at the other end of the country (or in China), rather than by a small factory in the county where you live. And subsidies to sprawl mean that for each of us, there are two separate cities--a daytime city where we work and shop, and a nighttime city where we sleep--each with its own electrical power system, and with expensive freeways running between them. Simply eliminating such massive, subsidized waste would likely reduce energy consumption to a fraction of what it currently is. And that's not even counting all sorts of other stuff, like passive solar building design, or on-site processing of farm waste into biomass fuel at the point of consumption.