Interfuel competition in the industrial sector of seven OECD countries

The purpose of this article is to present an analysis of interfuel substitution in the industrial sector of seven major OECD countries (the United States, Canada, Japan, Germany, France, the United Kingdom and Italy) over the 1960-1993 period. Translog models are used to provide estimates of price elasticities from annual data for each country. Results outline the weakness of price elasticities and changes in behaviour over the last 35 years and show evidence of asymmetric effects. Since the collapse of oil prices in 1986, substitution has stopped, industrial energy demand and oil consumption have stagnated. Interfuel substitution is widely induced by events other than relative price changes: energy policy, political and institutional constraints, changes in economic activity, characteristics within individual country sectors. (C) 1999 Elsevier Science Ltd. All rights reserved.