ENERGY ANALYSES AND THE DETERMINATION OF MULTIREGIONAL PRICES

Abstract

In the last decade, many analysts have tried to investigate energy supplies, demands, and distribution. Most of the studies in the United States have been conducted using a partial equilibrium framework and have concentrated on national supplies, demands, and distribution. In this paper, a theoretical general equilibrium framework is set forth that can be used to trace both the regional and industrial repercussions of changes in wages, prices, or demands in the energy industries. An example of the type of some of the empirical results that are obtainable is also given. Between 1972 and 1976 the price of coal in New England rose from $0.50 per million Btu to $1.26, and the price of oil rose from $0.56 to $1.87. Such increases are very large compared with the usual changes in industrial prices and have led to growing concern over possible repercussions on other industrial prices, on private and public expenditures, and on output and employment. Of particular concern in the present study are the differential regional impacts caused by changes in regional energy costs. The purpose of this paper is to outline a comprehensive and systematic multiregional theoretical framework that can be used to study regional price changes. A primal version of the multiregional input-output (MRIO) model was used in 11974 to analyze the interactions between energy and transportation (Polenske [10]). As far as is known, only two other versions of the MRIO model are being developed at the present time for use in energy analyses. One is the model by Park and Sandoval [9], the other a model by Goettle, Cherniavsky, and Tessmer [5]. Both models are developed for the primal version of the MRIO model, within a linear programming framework. For the present study, a dual version of the MRIO model has been developed. 1 It is an extension of the national price models that have been described by LeonThe author is associate professor of Regional Planning in the Department Of Urban Studies and Planning, Massachusetts Institute of Technology. She acknowledges with gratitude the valuable assistance received from Nathaniel Ng, Ananna S. Tse, and William H. Crown. The data for the multiregional input-output accounting system for 19 industries and 9 regions used for this study were constructed by Nathaniel Ng and Ananna Tse. The calculations for this paper were made by William H. Crown. 1 The theoretical work on various multiregional dual price models was done as a team effort by members of the MRIO research staff. Members participating with the author in this work since 1976 were: Patrick Del Duca, Gary Kaitz, Gregory Pai, Ananna Tse, and Jeffrey Young. Several studies using the dual MRIO system are in progress--Del Duca [3], Pai [8], Young [11].