IN recent years, many countries have prepared comprehensive 'energy studies' as a basis for fuel resource policy and planning. 1 The nation's aggregate energy needs are projected into the future and confronted with an analysis of prospective fuel supplies.2 Such studies, which make it possible to establish a forward view of how future energy requirements can be met-with what fuels, from what sources, and at what costs-are also valuable for the fuel industries to establish demand and sales forecasts and for making investment, marketing, and pricing decisions. The long term forecast of energy consumption, which is the principal building block of this research, is usually based on functional relationships between energy consumption and economic activity. Past studies in Western Europe and the United States have frequently used the 'energy elasticity', the percentage change in energy use associated with a i per cent change in economic activity. Recent work has tended toward increased methodological sophistication, but the implicit 'energy elasticity', overall or sector-by-sector, remains an important consideration in judging the reasonableness or consistency of the forecast. Since in advanced economies fuel use appears to grow more slowly than GNP; the elasticities generally have been found to be less than i.o. Gross elasticities of energy consumption with respect to GNP have been estimated variously as between .7 and .9 and somewhat lower with respect to industrial production.3 Figures of this range of magnitude have been widely accepted as the basis for authoritative projections of energy require* This is a project of the Economics Research Unit of the University of Pennsylvania. Partial support for this research was provided under a grant from the National Science Foundation. I Some important recent studies are: U.S. Senate, Committee on Interior and Insular Affairs, Report of the National Fuels and Energy Study Group, Washington, I962; Commissariat General du Plan, Rapport General de la Commission de l'Energie, Paris I96I; O.E.E.C., Toward A New Energy Pattern in Europe (Robinson Report), Paris, I96I; Energv Policy: Problems and Objectives, Paris, I966; European Economic Community, Etude sur les Perspectives Energetiques a Long Terme de la Communaute Europeenne, Luxembourg I964, and Nouvelles Refjexions sur les Perspectives Energetiques a Long Terme de la Communaut Europeenne, (mimeo), Luxembourg, I966; Arbeitsgemeinschaft Deutscher Wirtschaftswissenschaftlicher Forschungsinstitute, Untersuchung uber die Entwicklung der Gegenwartigen und Zukunftigen Struktur von Angebot und Nachfrage in der Energiewirtschaft der Bundesrepublik, Duncker and Humblot, Berlin, I962. 2 For a discussion of the problems of energy projections and the procedures which are frequently used see, United Nations, Economic Commission for Europe, Methods and Principles for Projecting Future Energy Requirements, New York, I964. 3 See Table IV on p. 54. In the developing countries, in contrast, the elasticity is frequently substantially above I.O.