The Treatment of Intermediate Materialsin the Estimation of the Demand for Energy: The Case of U.S. Manufacturing, 1947-1971

Continuing increases in the price of energy have stimulated extensive research on energy demand and factor substitution in the U.S. economy. The manufacturing segment of the U.S. economy consumes approximately one-fourth of aggregate U.S. energy if measured by Btu consumption, and about 40 percent if measured by the Btu content of the fuel used for electric power generation (see Table 1). Hence, the manufacturing sector has been specifically targeted as a source of potential reductions in energy demand in the Energy Policy and Conservation Act of 1975, This paper was completed while the author was Assistant Professor of Economics at Michigan State University. Acknowledgment is given to Ernst Berndt, Robert Engle, Franklin Fisher. Jerry Hausman, James Johannes, Robert Pindyck, and Robert Rasche for helpful comments. The author retains responsibility for errors.