An Energy-Saving Society from the Input-Output Table Perspective
Rising Oil Prices as an Opportunity to Examine Industrial and Lifestyle Infrastructure
October 1 (Wednesday) 2008
Toshiaki Kouno
Research Associate
Summary
- Soaring raw material prices are having a substantial impact on lifestyles. As noted in the 2008 Trade White Paper, the effect of the inflow of speculative money into the commodity futures market cannot be ignored, and there is no denying that there are other factors besides real demand behind the rise in prices. However, achieving sustainable economic growth in the form of wasting resources is difficult; it is necessary to develop an energy-saving society impervious to price spikes in raw materials.
- With a focus on the rise in crude oil price, the input-output table was utilized to consider a society resistant to the effect of higher oil prices as well as infrastructure development. Specifically, the 2000 input-output table (integrated middle classification, 104 sections) was independently integrated further into 50 sections and analyzed. The analysis was conducted by creating an input-output table with areas such as chemical products and transport in greater detail and integrating the service industries.
Impact of a “Petroleum Product” Price Increase
The impact of rising crude oil prices in Japan should manifest through an increase in the price of “petroleum products”, including fuel oil with refined crude oil such as gasoline and heavy oil. The potential effect of a “petroleum product” price hike was analyzed. Sectors expected to be heavily impacted are basic organic chemical products, private transport, organic chemical products, synthetic-resin, coal products, nonmetallic minerals, air transport, water transport and road transport.
Though both “chemical products” and “transport” are points that should be focused on, there are significant differences in terms of the impact. Regarding chemical products, organic chemical substances (synthetic alcohol, synthetic rubber, ethylene, benzene and so on) are naturally affected more than inorganic chemical substances (caustic soda, salt and so on); in addition, so-called upstream processes are also more heavily impacted than downstream processes. The effect on medical products is quite limited.
In addition, while other means of transportation are heavily impacted, railways are almost entirely unaffected. This is because the railway sector is traditionally energy efficient and most of the major lines use electricity as their power source.
Compared with the transport sector, the impact on the power sector is low. This is due to a substantial decrease in the oil ratio in power production over the last 20 years. In 1980, approximately half of power production originated in petroleum products. With the advance of nuclear power and switch to coal and natural gas with regards to thermal power generation, dependence on oil dropped to 11% in 2005 and should dip below 10% in the near future.
In the event of a sustained increase in crude oil prices, however, it is likely that coal and natural gas prices would eventually be further inflated through an increase in demand. Even with nuclear power, in the long run there is a possibility that the power sector could impacted.
Expected Impact on Industries and Lifestyles
Based on the results of the preceding analysis, rising crude oil prices should affect distribution the most among the various industry sectors. Minimization of distribution costs through IT and improved efficiency through outsourcing are countermeasures that enterprises can take. Moreover, from the perspective of reducing carbon dioxide emissions, at the social level there is a need to promote a shift in distribution to railway transport.
Increases in distribution as well as mobility costs, such private vehicles where gasoline is the primary energy source, will have the largest direct impact on lifestyles. The level of this impact, however, should differ significantly among regions. In areas with dense railway networks it is easy to survive without private vehicles, and as such it is difficult to imagine urban consumers being hit too hard. The effects are expected to be severe, however, in regions where there are no simple alternatives to private vehicles.
In such regions, the following are raised as countermeasures to rising crude oil prices: 1. introduction of hybrid and electric cars; 2. developing public transportation infrastructure such as light rail transit; 3. creating “compact cities” such as those found in Toyama and Aomori.
Towards Implementation of Countermeasures
To implement such countermeasures it is necessary to reexamine infrastructure. Though electric and fuel-cell vehicles are technologically feasible, the infrastructure to provide energy for such vehicles is inadequate. Solutions including how to utilize existing gasoline stations must be examined.
Even if distribution is shifted to railway transport, certain lines such as the main Sanyo line have already reached their capacity for freight transport. How to go about increasing freight transport capacity and upgrading terminals become pressing issues.
Urban development without dependence on roads is necessary with regards to developing new public transportation infrastructure and compact cities. This has relevance as an aging society countermeasure, and is also important in terms of energy and the environment. In the past, public investment has tended to flow into road construction; it is important to also look towards strengthening connections with other means of transport and developing infrastructure for energy supply centers.
Such infrastructure development will likely see significant progress in the event of a sustained increase in crude oil prices. Even if this increase is only temporary, the realization of an energy-saving society remains a lasting policy issue. In this way, high crude oil prices represent an opportunity for the realization of new infrastructure and industrial structures.