EPRG WORKING PAPER - Electricity Policy Research Group

Figure 1: Average Real Energy Prices in OECD Manufacturing Sector in 2005.price for the manufacturing sector by weighting energy carriers’prices by the consumptionof each energy carrier in the manufacturing sector. 10We construct the price of materialsby weighting international commodity prices (from IMF International Financial Statisticsdatabase) by sector consumption of each commodity (from UNIDO Industrial productiondatabase). The data series for labor, energy, and material costs, and for the values of outputand capital stock are all de‡ated to their real values based on the industry de‡ators using1995 as a base year, and converted into the United States dollars.Figure 1 shows the average energy prices in OECD manufacturing sector across countriesin 2000. The highest energy prices are in Italy, Ireland, Japan and Sweden, and the lowestare in Australia, Netherlands, Greece, and the United States. These di¤erences in energyprices across OECD countries are because of variation in energy taxes, the types of fuels usedin the production process, and local distribution costs. Energy taxes are the major factor explainingthe energy price di¤erences - for example, in 2008 gasoline tax accounted for nearly60 percent of …nal energy price in Sweden, Germany and the United Kingdom, compared tojust 13 percent in the United States (International Energy Agency 2008). However, variationin industrial energy prices across the OECD manufacturing industry is relatively small10 Speci…cally, we consider the following energy products - oil and petrolium products (high- and lowsulphurfuel oil, light fuel oil, automotive diesel, and gasoline), natural gas, coal, and electricity. Consumptionof each product is measured in British thermal units (BTUs). More details are available in the technicalappendix, available from authors upon request.6