Crude Oil Intensity, Production Efficiency and Adaptability to Energy- Evidence from an Economy with a High Dependence on Energy Imports

Abstract

Taiwan is an economy with highly dependent on energy imports. Change in oil price not only affects the cost of production, but also on the economic growth. Due to the international crude oil prices being relatively stable with low price except the first two oil crises, it has brought up Taiwan's economic growth. However, after 2000 the crude oil price has risen and become an unstable factor for economic development. Taiwan is facing an industrial restructuring. Energy-saving technologies and improved efficiency might play an important role. Additionally, Kyoto Protocol to the United Nations Framework Convention on Climate Change in 1997 was to set CO2, CH4, N2O, HFCs, PFCs and SF6 reduction targets as the improvement of global warming climate. As a member of international society, it is necessary to improve the industrial productivity to contribute to the global warming problem. From crude oil intensity and spillover effects of change in crude oil price, we might detect whether industrial production efficiency and adaptability to energy improves or not. Based on the input-output table during the periods of 1981 to 2011, this study employs the factor decomposition model to investigate change in Taiwan's reliance on crude oil through the index of oil intensity. Additionally, by adding the importing price sensitivity into the factor decomposition model, we examine the impact of changes in international crude oil price on domestic prices and explore the determinants of changes in domestic prices arising from crude oil price and verify the characteristics of Taiwanese industry.

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Author Information
Chung-Huang Huang, Taiwan Research Institute, Taiwan
Han-Pang Su, Taiwan Research Institute, Taiwan
Chin-Wen Yang, Taiwan Research Institute, Taiwan
Jian-Fa Li, Chaoyang University of Technology, Taiwan
Cheng-Yih Hong, Chaoyang University of Technology, Taiwan

• Category: Energy: Energy Economics and Ecological Economics

Posted by James Alexander Gordon

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