The Impact of Energy Price Increases on Households

Effects of energy price increases on households at different income levels are estimated. Direct expenditures are taken from household budget studies; indirect consumption is estimated by applying input-output coefficients to nonenergy expenditures. Total energy requirements are obtained and stated as percentages of household income for coal, crude petroleum, refined petroleum, electricity, and natural gas. These percentages permit estimation of the impact of energy prices on the households, assuming that the price changes result in no substitution among goods or energy forms. Several general conclusions are developed: (1) Direct energy expenditures are regressive in their structure; lower income households spend a greater portion of their budget on these items than wealthier households. (2) Indirect energy expenditures also seem regressive. (3) Indirect energy requirements represent over half of all energy transactions. (4) All energy taxes are probably regressive; utility gas taxes are the most regressive, and taxes on refined petroleum products such as gasoline are the least.