The future of UK final user energy demand

Anticipation of final user energy demand is central to suppliers' and policy makers' plans. Recent developments in dynamic econometrics, such as the cointegration approach, have enabled energy modellers to study long run relationships between demand and its determinants, principally economic activity and real prices. The purpose of this paper is to present the SEECEM output, elasticity estimates and forecasts using the cointegration approach, as well as the methodology and analysis underlying them. As economic activity is expected to grow in all but the iron and steel sector, the long run relationships indicate that most sectors will increase overall fuel use up to the year 2000. Despite weak but potentially volatile world oil prices and given stable environmental policies, average real oil prices should remain broadly constant except in the transport sector. Economic activity elasticities and increased competition in supply industries imply that natural gas and electricity are likely to take an increasing share of final user requirements at the expense of petroleum products and coal. This gradual and continued shift towards cleaner fuels is likely to ameliorate adverse environmental consequences resulting from the overall growth in final user fuel demand