Web Note No. 1

This memo estimates how much of their income Alaska households spend for home energy uses, after years of rising energy prices.1 We made the estimates at the request of State Senator Lyman Hoffman. We include costs for electricity, heat, and other home energy uses—but do not include costs for transportation fuel. Keep in mind that these are truly estimates. Because of time lags in data collection and reporting, actual consumer price data for 2008 are not available. To estimate consumer energy prices as of May 2008, we used statistical models of the relationship between oil prices and consumer prices. We also used the most recent data on per capita personal income from the Bureau of Economic Analysis to estimate 2007 annual household income. These estimates are likely to overstate actual household expenditures. As energy costs rise, households find ways to consume less. How much less, we don’t know. For these estimates, we used consumption households reported at the time of the 2000 U.S. Census. Also, the estimates in this memo reflect what energy would cost households for a year, at May 2008 prices. Consumers of course haven’t yet seen a full year at these prices, and we don’t know where prices will go from here.2 Therefore, these estimates are really like a cost index—that is, they estimate what it would cost to buy a specific amount of energy, at specific prices. That’s not the same as actual annual household expenditures. Still, these estimates give a good picture of wha