Energy demand in the US manufacturing sector

The use of energy in the US manufacturing sector has been declining over the last two decades and the rate of decline has accelerated in the post-1973 period; the period of sharply-higher energy prices. Within this context, the main purpose of this study is to estimate the sensitivity of the demand for energy to changes in the relative price of energy and to changes in US manufacturing industry output. It also aims to estimate the substitution elasticities between energy and other factors of production and to determine the direction of the bias of factor utilization in the technology of the production process. The analysis is carried out for the US manufacturing sector in total and for its 10 sub-sectors. The paper also presents a simple approach to decomposing the total change in energy demand into income or output effects, price effects and technological change effects.