Abstract:
This paper discusses developments in energy consumption and oil markets since
the early 1970s, highlighting the fall in energy and oil consumption per unit
of output and the accompanying reduction in industrialised countries' exposure
and vulnerability to energy shocks. In an attempt to analyse the determinants
of aggregate output, a very simple model is subsequently presented to discuss
the major transmission channels of energy price shocks and the related risk of
disturbances to long-term equilibrium growth. The focus is then turned on
investment and the capital stock and their role in the determination of energy
demand. Energy demand equations are empirically derived for seven major
countries, distinguishing in each case between demand for energy in industry,
transportation and the commercial and residential sectors.