The demand for energy in Australia

Abstract

This thesis studies the evolution of the demand for energy in Australia in the period since the Second World War. Attention is paid first to the role of shifts in the importance of different consuming groups and, secondly, to the determinants of changing consumption within each group. The evolution of the energy market in Australia is poorly documented, and the available statistics exhibit severe deficiencies. Therefore the strategy adopted is first to survey the development of the energy market and then to concentrate attention on a couple of sectors, where there is greatest scope for contributing to an understanding of the nature of the demand for energy. The outline of the thesis is as follows. In chapters two and three a survey of the evolution of energy consumption in Australia is presented. In chapter two the major post-war changes in flows of energy are described, while in chapter three there is an analysis of observed shifts in consumption of fuels in different sectors,, based on published contemporary explanations and the evidence of recorded statistics. As a result of this investigation it is decided that the residential and industrial sectors are the best recorded and offer the greatest opportunity for a detailed exploration of the demand for energy. Chapters four and five are mainly devoted to an econometric study of the residential demand for fuels. In chapter four time-series data for individual states are used in a study of the demand for electricity, reticulated gas, lighting kerosene and heating oil, but few conclusions emerge because of the collinearity of the data. In chapter five the retail demand for electricity is studied using data for a cross-section of electricity authorities in New South Wales and the Australian Capital Territory. Plausible estimates are obtained of the effects of variations in prices and personal incomes. Chapters six, seven and eight present an analysis of the industrial demand for fuels. The data comprise a sample of sixty manufacturing industry subclasses over a period of nineteen years. The role of energy in the productive process is examined, and estimates are obtained of elasticities with respect to changes in output and prices, and of the lags in adjustment. In chapter six each industry is studied separately using simple log-linear demand functions; but few general conclusions are obtained because of the variability of the estimates and the large number of industries. Therefore in chapter seven the problem of aggregating and summarising the estimates obtained for individual subclasses is considered. Next, in chapter eight, a putty-clay vintage model of the demand for variable factors of production is developed and applied to the demand for labour and energy, using pooled data for groups of subclasses. This model is quite successful and generates estimates that support those obtained using simpler models. The results suggest that long-run output elasticities are usually less than one for labour and equal to one for fuels, Substitution effects appear to be weak, except possibly between solid and liquid fuels. There is evidence of labour-saving technical progress but little suggestion of fuel-saving technical progres. Show more