The Impact of Fuel Price on Energy Consumption on Indonesia’s Industries: A Firm-Level Analysis

Pradana Puche Widodo; Toshihiro Kudo

doi:10.15294/jeec.v11i2.68940

Abdelaziz, E. A., Saidur, R., & Mekhilef, S. (2011). A review on energy saving strategies in industrial sector. Renewable and Sustainable Energy Reviews, 15(1), 150–168. https://doi.org/10.1016/j.rser.2010.09.003
Agnolucci, P. (2009). The energy demand in the British and German industrial sectors: Heterogeneity and common factors. Energy Economics, 31(1), 175– 187. https://doi.org/10.1016/j.eneco.2008.08.005
Agnolucci, P., De Lipsis, V., & Arvanitopoulos, T. (2017). Modelling UK sub- sector industrial energy demand. Energy Economics, 67(17), 366–374. https://doi.org/10.1016/j.eneco.2017.08.027
Andersen, T. B., Nilsen, O. B., & Tveteras, R. (2011). How is demand for natural gas determined across European industrial sectors? Energy Policy, 39(9), 5499–5508. https://doi.org/10.1016/j.enpol.2011.05.012
Asafu-Adjaye, J. (2000). The relationship between energy consumption, energy prices and economic growth: Time series evidence from Asian developing countries. Energy Economics, 22(6), 615–625. https://doi.org/10.1016/S0140-9883(00)00050-5
Bjørner, T. B., & Jensen, H. H. (2002). Energy taxes, voluntary agreements and investment subsidies-A micro-panel analysis of the effect on Danish industrial companies’ energy demand. Resource and Energy Economics, 24(3), 229–249. https://doi.org/10.1016/S0928-7655(01)00049-5
Brenton, P. (1997). Estimates of the demand for energy using cross-country consumption data. Applied Economics, 29(7), 851–859. https://doi.org/10.1080/000368497326507
Burke, P. J., & Liao, H. (2015). Is the price elasticity of demand for coal in China increasing? China Economic Review, 36, 309–322. https://doi.org/10.1016/j.chieco.2015.10.004
Burke, P. J., & Yang, H. (2016). The price and income elasticities of natural gas demand: International evidence. Energy Economics, 59, 466–474. https://doi.org/10.1016/j.eneco.2016.08.025
Carfora, A., Pansini, R. V., & Scandurra, G. (2019). The causal relationship between energy consumption, energy prices and economic growth in Asian developing countries: A replication. Energy Strategy Reviews, 23(October 2018), 81–85. https://doi.org/10.1016/j.esr.2018.12.004
Chan, H. L., & Lee, S. K. (1997). Modelling and forecasting the demand for coal in China. Energy Economics, 19, 271–287.
Dasgupta, S., & Roy, J. (2015). Understanding technological progress and input price as drivers of energy demand in manufacturing industries in India.
Energy Policy, 83, 1–13. https://doi.org/10.1016/j.enpol.2015.03.024 Figueiredo Filho, D. B., Silva, J. A., & Rocha, E. (2011). What is R2 all about?
Leviathan – Cadernos de Pesquisa Política, 3(3), 60–68. Retrieved from https://www.revistas.usp.br/leviathan/article/download/132282/pdf_12/
Hamilton, J. D. (1996). This is what happened to the oil price-macroeconomy relationship. Journal of Monetary Economics, 38(215), 215–220.
Hang, L., & Tu, M. (2007). The impacts of energy prices on energy intensity: Evidence from China. Energy Policy, 35, 2978–2988. https://doi.org/10.1016/j.enpol.2006.10.022

Hill, C., & Cao, K. (2013). Energy use in the Australian Manufacturing Industry: An analysis of energy demand elasticity. Retrieved from http://www.murdoch.edu.au/School-of-Management-and- Governance/_document/Australian-Conference-of-Economists/Energy-use- in-the-Australian-manufacturing-industry.pdf
King, G. (1986). How not to lie with statistics: Avoiding common mistakes in quantitative political science. American Journal of Political Science, 30(3), 666. https://doi.org/10.2307/2111095
Krichene, N. (2002). World crude oil and natural gas: A demand and supply model. Energy Economics, 24, 557–576.
Lee, K., & Ni, S. (2002). On the dynamic effects of oil price shocks: A study using industry level data. Journal of Monetary Economics, 49(4), 823–852. https://doi.org/10.1016/S0304-3932(02)00114-9
Lin, B., & Chen, Y. (2019). Will economic infrastructure development affect the energy intensity of China’s manufacturing industry? Energy Policy, 132(May), 122–131. https://doi.org/10.1016/j.enpol.2019.05.028
Lin, C. Y. C., & Prince, L. (2013). Gasoline price volatility and the elasticity of demand for gasoline. Energy Economics, 38, 111–117. https://doi.org/10.1016/j.eneco.2013.03.001
Ministry of Energy and Mineral Resources. (2016). 2016 Handbook of Energy and Economic Statistics of Indonesia. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bah&AN=19238171site=ehost-live
Ministry of Energy and Mineral Resources. (2017a). 2017 Handbook of Energy and Economic Statistics of Indonesia. Jakarta: Ministry of Energy and Mineral Resources.
Ministry of Energy and Mineral Resources. Peraturan Presiden Republik Indonesia tentang Rencana Umum Energi Nasional. , (2017).
Ministry of Energy and Mineral Resources. (2018). 2018 Handbook of Energy and Economic Statistics of Indonesia. Jakarta: Ministry of Energy and Mineral Resources.
Ministry of Industry. (2015). Rencana Induk Pembangunan Industri Nasional 2015-2035. https://doi.org/10.1017/CBO9781107415324.004
Ministry of Industry. Peraturan Menteri Perindustrian Republik Indonesia tentang Besaran Jumlah Tenaga Kerja dan Nilai Investasi untuk Klasifikasi Usaha Industri. , (2016).
Pindyck, R. S. (1978). The optimal exploration and production of nonrenewable resources. Journal of Political Economy, 86(5), 841–861. https://doi.org/10.1086/260714
Pindyck, R. S., & Rubinfeld, D. L. (2013). Microeconomics. In Pearson Education. Prentice Hall.
Polemis, M. L. (2007). Modeling industrial energy demand in Greece using cointegration techniques. Energy Policy, 35(8), 4039–4050. https://doi.org/10.1016/j.enpol.2007.02.007
Prasetyawan, W. (2017). Indonesia’s Mining Industry, 1997–2014: An Institutional Assessment. In Southeast Asia beyond Crises and Traps (pp. 251–276). https://doi.org/10.1007/978-3-319-55038-1_1
Ram, M., Child, M., Aghahosseini, A., Bogdanov, D., Lohrmann, A., & Breyer,

C. (2018). Response to ‘A comparative analysis of electricity generation costs from renewable, fossil fuel and nuclear sources in G20 countries for the period 2015–2030.’ Journal of Cleaner Production, 199, 687–704. https://doi.org/10.1016/j.jclepro.2018.10.049
Rotemberg, J. J., & Woodford, M. (1996). Imperfect competition and the effects of energy price increases on economic activity (No. w5634).
Sarkodie, S. A., & Adom, P. K. (2018). Determinants of energy consumption in Kenya: A NIPALS approach. Energy, 159, 696–705. https://doi.org/10.1016/j.energy.2018.06.195
Schulte, I., & Heindl, P. (2017). Price and income elasticities of residential energy demand in Germany. Energy Policy, 102(July 2016), 512–528. https://doi.org/10.1016/j.enpol.2016.12.055
Simon, C. P., & Blume, L. (1994). Mathematics for Economists. Norton, New York.
Tasri, A., & Susilawati, A. (2014). Selection among renewable energy alternatives based on a fuzzy analytic hierarchy process in Indonesia. SUSTAINABLE ENERGY TECHNOLOGIES AND ASSESSMENTS, 7, 34–44.
https://doi.org/10.1016/j.seta.2014.02.008

Wooldridge, J. M. (2012). Introductory Econometrics: A Modern Approach. In

Nelson Education (5th ed.). https://doi.org/10.1016/j.jconhyd.2010.08.009
Zhao, X., & Wu, Y. (2007). Determinants of China’s energy imports: An empirical analysis. Energy Policy, 35(8), 4235–4246. https://doi.org/10.1016/j.enpol.2007.02.034
Ziramba, E. (2009). Disaggregate energy consumption and industrial production in South Africa. Energy Policy, 37(6), 2214–2220. https://doi.org/10.1016/j.enpol.2009.01.048

Abstract viewed - 93 times
PDF downloaded - 88 times

Affiliations

Pradana Puche Widodo
National Graduate Institute for Policy Studies, Tokyo, Japan

Toshihiro Kudo
National Graduate Institute for Policy Studies, Tokyo, Japan

Content Top

The Impact of Fuel Price on Energy Consumption on Indonesia’s Industries: A Firm-Level Analysis

Pradana Puche Widodo ,
Toshihiro Kudo

Vol 11 No 2 (2022): December 2022

DOI 10.15294/jeec.v11i2.68940

Submitted: May 23, 2023

Published: May 23, 2023

Abstract

This study aims to investigate the effect of energy price changes on energy consumption, especially oil and coal, for Indonesian manufacturing sectors. Unbalanced panel data analysis is utilized on firm-level data from 2003 to 2015 to examine the price elasticity of oil and coal demand. The estimation indicates that Indonesia’s manufacturing sectors are sensitive to energy price. On the aggregate analysis, one percent oil price increase is significant to reduce the demand of 0.194 percent, while coal consumption is not significantly affected by its price. Coal regression illustrates different outcomes than oil estimation which shows a positive relationship between coal price and coal demand even though it is insignificant. This phenomenon can be possibly interpreted through several explanations: a small number of firms using coal, concentration of coal demand in a few sub-sectors, and meager price of coal relative to oil. For further understanding, sectoral analysis has been examined on five priority sub-sectors—food and beverage; textile, apparel and footwear; chemicals and pharmacy; electronics and optical device; and automotive and transport equipment. The sectoral evaluations suggest that price elasticity for oil demand is considered as inelastic, ranging from 0.184 to 0.387 in absolute value. Oil price changes have the most impact on textile, apparel, and footwear sub-sectors, while food and beverage is the most unaffected by oil shocks.