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The Response of World Energy and Oil Demand to Income Growth and Changes in Oil Prices

The Response of World Energy and Oil Demand to Income Growth and Changes in Oil Prices This paper reviews the path of world oil demand over the past three decades, and the effects of both the oil price increases of the 1970s and the oil price decreases of the 1980s. Compared with demand in the industrialized countries, demand in the Less Developed Countries (LDC) has been more responsive to income growth, less responsive to price increases, and more responsive to price decreases. The 1056-346619511 022-0 145$05.00 DARGAY & GATELY LDC has also exhibited much greater heterogeneity in income growth and its effect on demand. We expect a smaller demand response to future price increases than to those of the 1970s. The demand response to future income growth will be not substantially smaller than in the past. Finally, given the prospect of growing dependence on OPEC oil, in the event of a major disruption the lessened price-responsiveness of demand could cause dramatic price increases and serious macroeconomic effects. INTRODUCTION In this article we review energy and oil demand over the past three decades, with a focus on three main regions: the industrialized countries of the Organi­ zation for Economic Cooperation and Development (OECD) which includes North America, Western Europe, Japan, Australia, and New Zealand; the http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Annual Review of Environment and Resources Annual Reviews

The Response of World Energy and Oil Demand to Income Growth and Changes in Oil Prices

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Publisher
Annual Reviews
Copyright
Copyright 1995 Annual Reviews. All rights reserved
Subject
Review Articles
ISSN
1543-5938
DOI
10.1146/annurev.eg.20.110195.001045
Publisher site
See Article on Publisher Site

Abstract

This paper reviews the path of world oil demand over the past three decades, and the effects of both the oil price increases of the 1970s and the oil price decreases of the 1980s. Compared with demand in the industrialized countries, demand in the Less Developed Countries (LDC) has been more responsive to income growth, less responsive to price increases, and more responsive to price decreases. The 1056-346619511 022-0 145$05.00 DARGAY & GATELY LDC has also exhibited much greater heterogeneity in income growth and its effect on demand. We expect a smaller demand response to future price increases than to those of the 1970s. The demand response to future income growth will be not substantially smaller than in the past. Finally, given the prospect of growing dependence on OPEC oil, in the event of a major disruption the lessened price-responsiveness of demand could cause dramatic price increases and serious macroeconomic effects. INTRODUCTION In this article we review energy and oil demand over the past three decades, with a focus on three main regions: the industrialized countries of the Organi­ zation for Economic Cooperation and Development (OECD) which includes North America, Western Europe, Japan, Australia, and New Zealand; the

Journal

Annual Review of Environment and ResourcesAnnual Reviews

Published: Nov 1, 1995

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