AbstractsEconomics

The oil crisis of 1973-74 dramatically changed the pattern of energy use in Korea. From 1973 to 1974, the consumption of oil increased only 1.62% while it increased at the average annual rate of 40.92% during 1966-1971. The consumption of coal, which had been nearly unchanged during the 1966-1971 period, started to increase again after the oil crisis.The main objective of this dissertation is to analyze the impact of the 1973-74 oil crisis on energy demand in Korea. In addition to this, substitution possibilities among energy sources in Korea are investigated utilizing a translog function.The log-linear energy demand equations with energy prices and GNP as explanatory variables explained most of the energy demand growth during 1961-1972 period. But the coal demand during the period of 1966-1971 could not be explained by the coal demand equation. Evidently, the energy modernization policy which started in 1967 is responsible for this result.All the estimated own price elasticities from the energy demand equations were inelastic, with correct signs. The estimated cross price elasticity of oil with respect to the price of coal was positive as expected. But the estimated cross price elasticity of coal with respect to the price of oil showed a negative sign. The estimated income elasticities for electricity and oil were both elastic, but the estimated income elasticity for coal was inelastic, showing the unpopularity of coal as an energy source.The comparison of the predicted and actual oil demand showed that without the oil crisis of 1973-74 the oil demand in 1976 would have been more than two times larger than the actual demand. The comparison also showed that coal became a more important energy source after the oil crisis. Following two implications are derived from the analysis: (1) the impact of the oil crisis was distributed over several years instead of being felt as a one-shot effect and (2) there is a limit in the degree of response of energy demand to income change.Substitutions among electricity, fuel oil, and coal in Korea were analyzed with 1962-1975 aggregate time-series data. All the estimated cross price elasticities were positive, implying that all three energy sources are substitutable. According to the analysis, coal and electricity were the best substitutes of all.