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An analysis of Southern energy expenditures and prices, 1984–2006
Cheryl Abbot
Whether the fuel is as basic as wood or as advanced as nuclear power, all businesses require energy to produce their goods and services. Similarly, all consumers require energy to meet their minimal living and transportation needs. That shared experience between businesses and consumers, coupled with the fact that energy prices are easily visible to both groups, makes energy costs a frequent topic of conversation. Movements in energy prices affect our economy, and depending on the elasticity of demand, rapid or unexpected changes in these prices might result in equally rapid shifts in business or consumer spending.
This article addresses the consumer side of the equation, with an emphasis on the South region,1 through an analysis of changes in household expenditures and retail prices for the years 1984 through 2006. Although energy prices climbed more than 60 percent between 2002 and 2006, the research presented here finds that Southern households were still devoting smaller shares of their total expenditures to energy costs than they were in 1984. Although, on an annual basis, energy price movements were much more volatile than nonenergy price movements, household energy expenditures rose at a slower rate than nonenergy expenditures over the long term. This resulted in declining shares of Southern budgets devoted to energy costs through most of the period. The most important factor in the slower rise in energy expenditures was the relatively stable—or even declining—price of gasoline through most of the period studied. However, gasoline was not the only major influence on total energy expenditures in the South: while household electricity consumption rose sharply in the last two-plus decades, below-average rates of increase in electricity prices, particularly during the first 20 years of the study, helped to restrain the rate of increase in household electricity expenditures.
This excerpt is from an article published in the April 2008 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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Footnotes
1 The South Census region consists of Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia, and the District of Columbia.
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