Assessing the suitability of input–output analysis for enhancing our understanding of potential economic effects of Peak Oil

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Publication date: 2008-08-30
First Published in: Energy
Authors: C. Kerschner, K. Hubacek


Given recent developments in energy markets and skyrocketing oil prices, we argue for an urgent need to study the potential effects of world oil production reaching a maximum (Peak Oil) to facilitate the development of adaptation policies. We consider input–output (IO) modeling as a powerful tool for this purpose. However, the standard Leontief type model implicitly assumes that all necessary inputs to satisfy a given demand can and will be supplied. It is problematic if the availability of certain key inputs becomes restricted and it is therefore only of limited usefulness for the study of the phenomenon of Peak Oil. Hence this paper firstly reviews two alternative modeling tools within the IO framework: supply-driven and mixed models. The former has been severely criticized for its problematic assumption of perfect factor substitution and perfect elasticity of demand as revealed by Oosterhaven. The supply-constrained model, on the other hand, proved well suited to analyze the quantity dimension of Peak Oil and is therefore applied empirically in the second part of the paper, using data for the UK, Japanese and Chilean economy. Results show how differences in net oil exporting, and net oil importing countries are visible regarding final demand. Industries, most affected in all countries, include transportation, electricity production and financial and trade services.

Published in: Energy, Volume 34, Issue 3, March 2009, Pages 284-290
Available from: ScienceDirect


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