Efficiency, dependency and the demand for oil

Frank Armand Altieri, Fordham University


Since the first oil shock of 1973-74, when the price of oil quadrupled, countries around the world have been seeking ways to reduce their dependency on imported crude oil. The hypothesis modeled and tested shows that all of the G-7 countries' dependency on imported oil was reduced (or, at worst, the rate of growth declined) by increasing their energy efficiency and that the relationship between energy demand and economic growth had been reduced in the 1970s.^ Japan, Germany and France, all being almost 100% dependent on imported oil, have increased their efficiency since 1974 to a point where they have reduced their imports of oil. By way of contrast, the United States has seen its dependency on imported oil increase since 1974 even though it has increased its efficiency. The United States increase in dependency was due to the reduction in the domestic output of oil. Energy demand was determined to be persistent over the business cycle.^ This dissertation first presented the empirical evidence of the dependency-efficiency relationship. Chapter 2 reviewed the relevant literature. Chapter 3 presented a simultaneous-equation model specification for the worldwide supply and demand for oil, a demand model for oil that includes an efficiency explanatory variable, a test for the cyclicality of energy demand, and a test to determine if the relationship between energy demand and economic growth has significantly changed in the 1970s. Empirical results were reviewed in Chapter 4. Chapter 5 included policy implications that result in analyzing the estimated parameters of the demand for oil equation. It also provides various tables for all the G-7 countries, that show the degree of response to changes in the real price of oil, changes in Gross Domestic Product, and changes in the level of energy efficiency. ^

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Recommended Citation

Altieri, Frank Armand, "Efficiency, dependency and the demand for oil" (1994). ETD Collection for Fordham University. AAI9425182.