The Energy Journal

In their recent paper, Smith and Hill (1985) perform a numerical experiment to compare three allocation functions: translog, logistic, and probabilistic. They found that the logistic function was generally better than the other two alternatives and that the probabilistic function was distinctly inferior to other methods in nearly all experiments. They observe that the probabilistic function has wide application in energy models and hope that their paper may dampen the enthusiasm for the probabilistic function.

Economists have long recognized that the cost of using an appliance or machine should incorporate both the associated energy cost and a user cost for the depreciation of capital that results. One must he careful in measuring the latter. Depending on whether the appliance or machine depreciates with time or usage, quite different measures of user cost can he valid. I attempt here to identify the differences and to suggest some possible tests for determining how consumers might incorporate appliance depreciation in their decision making.

Since the early 1970s, Cuba has been selling oil products, obtained largely from imported Soviet crude, in Western Europe for hard currency. Initially, these sales were relatively small and limited to refined products, such as naphtha. More recently. the magnitude of these reexports has grown significantly, and the range of exported products has expanded to include crude oil.

No student of the electric power industry and its regulation can help but be troubled by the industry's recent historical record on productivity and technical change. For many years the electric power industry was one of the leading sectors of the economy in terms of productivity growth and technological innovation. This is no longer true. By almost every measure, productivity growth and technical change have virtually ceased in the past decade (or even decreased, by some estimates).

Oil prices are regulated in virtually every developing country. Economists, oil businessmen, politicians, and bureaucrats usually have diverging views on the best price for petroleum products. Costs, government objectives, and political influences all affect energy price determination (see Figure 1). The outputs-sets of energy prices over time-influence the welfare of particular groups in society as well as, naturally, society as a whole. Some sets of prices may be more efficient than others, some may be regarded as more equitable.

The price elasticity of demand for oil has changed significantly since the sharp rise in oil prices in late 1973. Although oil is still a necessary commodity with a price elasticity of less than one, the policies recently introduced by many importing countries to store oil and reduce its consumption, the continuous development of energy alternatives, and the increase in oil suppliers have contributed significantly to the rise in the price elasticity of demand for this vital commodity.

The description and the forecast of residential electricity consumption is not only important for many areas of economic policy but also for the long-term investment plans of enterprises supplying electrical power. In the past most projections of future residential electricity demand have missed their target values. Besides erroneous assumptions concerning the development of exogeneous variables, there is strong evidence that misspecification of underlying relations and neglect of aggregation problems have contributed to this.

Our paper analyzes the sources of labor productivity variation in U.S. bituminous coal surface mining from 1960 to 1976. The coal mining industry was among the first to experience a prolonged decline in labor productivity in the post-World War II period. In surface mining nationally, labor productivity in 1977 was 26.6 tons per worker-day, or 28 percent less than the peak of 36.7 tons per worker-day achieved in 1973. Moreover, in several major coal-producing states, the decline began much earlier and was more dramatic. For example, in West Virginia (the first state to experience declining productivity) the loss in productivity between 1965, the year in which productivity in the state peaked, and 1976 was nearly 52 percent. Eastern Kentucky experienced an even larger drop of 56 percent between 1967 and 1976. It was only the expansion of surface mining to western states in the 1970s that delayed the appearance of a national decline in productivity until the early 1970s. The industry has thus foreshadowed the labor productivity declines that subsequently occurred in other industries.

Our paper provides a quantitative analysis of market behavior for the purchase of energy efficiency in residential appliances and heating and cooling equipment. Accurate forecasts of residential energy use require quantitative assessments of market decisions about energy efficiency. The results of our investigation of market behavior can lead to a better understanding of the barriers to investment in energy conservation. Understanding market behavior over time is a prerequisite to an evaluation of the need for and the importance of policies to promote energy efficiency.

Off the coast of Norway is a huge, undeveloped petroleum reservoir. The exploitation of this resource is a challenge to the oil industry both because of its specific reservoir geology and its deep water location. One of the decisions that must be made regarding this field is the choice of the injection method. Our report discusses decision rules for the choice of R&D strategies for methods of supplementary recovery.

The crucial role of energy as an input in the production process has engaged the serious attention of energy planners and researchers in recent years. This was especially true after the OPEC oil embargo of 1973 and the natural gas shortages in the winter of 1976-1977. The prospect of similar energy supply disruptions and price escalations in the future has reinforced the need for adopting measures to reduce energy consumption.

Reducing an involved logical argument (or a detailed empirical study) to its essential elements usually makes it more accessible and can help us focus future research. Reister's comment on our paper purports to provide such a summary of our findings. Indeed, it might appear that he has demonstrated that our conclusions were obvious from the outset. Unfortunately his comment is an example of why we began this response by noting that simplification usually (rather than always) improves understanding. In this case it has led to incorrect conclusions.