Energy Costs and Export Performance 

by David Riker 

Office of Competition and Economic Analysis 

April 2012 

Manufacturing and Services Economics Briefs are produced by the Office of Competition and Economic Analysis of 

the International Trade Administration’s Manufacturing and Services unit. A complete list of reports, along with 

links to other trade data and analysis, is available at www.trade.gov/mas/ian. 
Manufacturing and Services Economics Brief No. 7 

ii Energy Costs and Export Performance – April 2012

Acknowledgements 

I would like to thank Joseph Flynn, Martin Johnson, and Johannes Moenius for helpful 

comments and suggestions. All remaining errors are my own. 
International Trade Administration 

Energy Costs and Export Performance iii 

Contents 

Acknowledgements ......................................................................................................................... ii 

Contents ......................................................................................................................................... iii

Executive Summary ........................................................................................................................ v

Introduction ..................................................................................................................................... 1

Overview of the Data and Analytical Framework .......................................................................... 1 

Estimates of the Historical Impact for the Three-Digit Industries .................................................. 4 

Estimates of the Historical Impact for Energy-Intensive Six-Digit Industries ............................... 6 

Discussion and Concluding Remarks ............................................................................................. 7 

Technical Appendix ........................................................................................................................ 9 

Tables 

Table 1 – Energy Intensity of Each Non-Petroleum Manufacturing Industry ................................ 2

Table 2 – Elasticity of Exports with Respect to the Price of Energy .............................................. 3

Table 3 – Growth in Energy Prices and Manufacturing Exports .................................................... 5

Table 4 – Elasticity Estimates for Energy-Intensive Six-Digit Industries ...................................... 6

Table 5 – Modeled Growth in Exports in Six-Digit Industries ....................................................... 7

 
Manufacturing and Services Economics Brief No. 7 

iv Energy Costs and Export Performance – April 2012

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International Trade Administration 

Energy Costs and Export Performance v 

Executive Summary 

 This economics brief presents a simple model of international trade that generates 

predictions about the effect of energy costs on export performance that are consistent with 

economic theory and available data. I calibrate the model to publicly available data for the U.S. 

manufacturing sector, first for the three-digit industries in the U.S. manufacturing sector and then 

on a more disaggregated basis for relatively energy-intensive six-digit manufacturing industries. 

Then I use the model to quantify the contribution of the rise in energy prices in each industry 

between 2002 and 2006 to the growth in the industry’s U.S. manufacturing exports over this time 

period. 

 The economic model in this brief demonstrates that energy prices have had a significant 

effect on the export performance of the U.S. manufacturing sector. The increase in energy prices 

between 2002 and 2006 limited the expansion of exports over that time period. The effects vary 

across industries based on energy intensities and the price elasticities of demand for U.S. 

products in foreign markets. The total impact on U.S. non-petroleum manufacturing exports 

during this period was a reduction in exports of approximately $11.5 billion per year. In other 

words, the increase in the industries’ exports would have been approximately $11.5 billion per 

year higher absent the increase in energy prices. The industry-level elasticity estimates can also 

be applied on a prospective basis to evaluate the effect of a policy-related change in energy 

prices on U.S. export performance. 

 
Manufacturing and Services Economics Brief No. 7 

vi Energy Costs and Export Performance – April 2012

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International Trade Administration 

Energy Costs and Export Performance 1 

Introduction 

 Reducing energy prices can significantly improve the export performance of U.S. 

manufacturing industries. However, measuring the magnitude of these economic benefits can be 

complex. It requires an estimate of the contribution of energy costs to production costs and an 

estimate of the price elasticity of an industry’s products in export markets. The latter depends on 

the U.S. industry’s share of export markets and the extent of international product differentiation. 

This economics brief presents a simple model of international trade that generates 

predictions about the effect of energy costs on export performance that are consistent with 

economic theory and available data. I calibrate the model to publicly available data for the U.S. 

manufacturing sector, first for the three-digit industries in the U.S. manufacturing sector and then 

on a more disaggregated basis for relatively energy-intensive six-digit manufacturing industries. 

Then I use the model to quantify the contribution of the rise in energy prices in each industry 

between 2002 and 2006 to the growth in the industry’s U.S. manufacturing exports over this time 

period. 

Overview of the Data and Analytical Framework 

 There were significant increases in the energy costs of U.S. manufacturing industries 

between 2002 and 2006. The Manufacturing Energy Consumption Survey (MECS) for 2002 and 

2006 report the dollar value of each industry’s energy costs. The MECS was administered in 

1985, 1988, 1991, 1994, 1998, 2002, 2006, and 2010.1

 2006 is the most recent year for which 

the aggregated results of the survey are publicly available. I supplement this information on 

energy costs and consumption with information on the value of shipments and the cost of 

materials and payrolls from the Annual Survey of Manufactures.2

 

 

1

 The survey is sponsored by the Energy Information Administration in the U.S. Department of Energy and is 

administered by the Bureau of the Census in the U.S. Department of Commerce. The 2002 and 2006 survey results 

are available online at www.eia.gov/emeu/mecs/contents.html. 

2

 The survey results for each year are available online at www.census.gov/manufacturing/asm/historical_data/. 
Manufacturing and Services Economics Brief No. 7 

2 Energy Costs and Export Performance – April 2012

The volume of energy consumption per production worker hour indicates the energy 

intensity of an industry. Among the NAICS three-digit non-petroleum manufacturing industries, 

the Chemicals, Paper Manufacturing, Primary Metals (including steel and aluminum), and NonMetallic Mineral Products (including cement) industries are the most energy-intensive in 2002 

(Table 1). 

Table 1: Energy Intensity of Each Non-Petroleum Manufacturing Industry 

NAICS Three-Digit Industry Thousands of BTUs per 

Production Worker Hour in 2002 

Food Products (311) 492

Tobacco and Beverages (312) 603

Textile Mills (313) 454

Textile Product Mills (314) 210

Apparel Manufacturing (315) 61

Leather and Allied Products (316) 105

Wood Product Manufacturing (321) 422

Paper Manufacturing (322) 2,969

Printing and Related Support Activities (323) 101

Chemicals (325) 6,558

Rubber and Plastic Products Manufacturing (326) 232

Non-Metallic Mineral Products (327) 1,381

Primary Metals (331) 2,661

Fabricated Metal Product Manufacturing (332) 167

Machinery (333) 123

Computer and Electronic Products (334) 173

Electrical Equipment (335) 251

Transportation Equipment (336) 178

Furniture (337) 70

Miscellaneous Manufacturing (339) 74
International Trade Administration 

Energy Costs and Export Performance 3 

A reduction in the price of energy in the United States can significantly increase an 

industry’s exports. The magnitude of the export expansion increases with the share of energy in 

the industry’s marginal costs of production and with the absolute value of the price elasticity of 

the industry’s products in its export markets (Table 2). The exact formula for the energy cost 

share is provided in the Technical Appendix. 

Table 2: Elasticity of Exports With Respect to the Price of Energy 

NAICS Three-Digit Industry Energy Cost 

Share 

 (௜ߠ)

Product Price 

Elasticity of Export 

 (௜ߛ) Demand

Energy Price 

Elasticity of Export 

 (௜ߝ) Demand

Food Products 0.023 -1.867 -0.042 

Tobacco and Beverages 0.016 -0.763 -0.013 

Textile Mills 0.045 -2.765 -0.123 

Textile Product Mills 0.017 -2.485 -0.042 

Apparel Manufacturing 0.011 -2.101 -0.023 

Leather and Allied Products 0.013 -2.406 -0.031 

Wood Product Manufacturing 0.024 -3.637 -0.086 

Paper Manufacturing 0.067 -1.776 -0.119 

Printing 0.019 -1.828 -0.035 

Chemicals 0.055 -1.128 -0.062 

Rubber and Plastic Products 0.033 -1.858 -0.061 

Non-Metallic Mineral Products 0.080 -1.560 -0.125 

Primary Metals 0.078 -2.756 -0.216 

Fabricated Metal Products 0.023 -1.979 -0.045 

Machinery 0.011 -1.933 -0.022 

Computer and Electronics 0.011 -1.419 -0.016 

Electrical Equipment 0.015 -1.767 -0.026 

Transportation Equipment 0.008 -2.547 -0.021 

Furniture 0.013 -1.901 -0.026 

Miscellaneous Manufacturing 0.012 -1.359 -0.016 
Manufacturing and Services Economics Brief No. 7 

4 Energy Costs and Export Performance – April 2012

The product price elasticities of export demand for each of the twenty three-digit 

industries are increasing (in absolute value) in the elasticity of substitution between competing 

products from different countries and are decreasing in the U.S. share of total expenditures on 

the industry’s products in export markets. The exact formulas for calibrating these values are 

also provided in the Technical Appendix. The industries with the highest product price elasticity 

of export demand are Wood Products, Textile Mills, and Primary Metals (Table 2). 

The energy price elasticity of exports (how much the value of exports increase for each 

percentage point increase in the industry’s price of energy) is obtained by multiplying the 

industry’s product price elasticity of exports demand and its energy cost share. The industries 

with the highest energy price elasticities are Primary Metals, Non-Metallic Mineral Products, 

Paper Manufacturing, and Wood Products (Table 2). The relative ranking of these industries 

depends on both the product price elasticities and the energy cost shares, but the energy cost 

shares usually dominate. Three of the industries with the highest energy price elasticities have 

the largest energy cost shares. The other two have more modest energy cost shares, but they 

have the two largest calibrated product price elasticities of export demand. 

Estimates of the Historical Impacts for the Three-Digit Industries 

 All twenty of the industries experienced an increase in energy prices between 2002 and 

2006, when measured on a constant-dollar per BTU basis. However, there is substantial 

variation in the magnitude of the increases across the industries (Table 3). The variation across 

the industries reflects differences in technologies and fuel mix and differences in the geographic 

location of the industry’s domestic production. 

The energy price elasticity estimates provide a measure of the effect of the increase in the 

industry’s energy prices between 2002 and 2006, holding foreign energy prices and other factors 

fixed. I reported the modeled change in the value of exports as a percentage change and as a 

constant 2006 dollar value, and I compare these to the historical change in the constant dollar 

value of the industry’s exports between 2002 and 2006 (Table 3). Eighteen of the twenty 

industries experienced an expansion in exports over the time period, rather than a decline. For 
International Trade Administration 

Energy Costs and Export Performance 5 

these eighteen industries, the model estimates the amount by which the increase in energy prices 

reduced export growth. For the two industries with historical declines in exports, the increase in 

energy prices contributed to the declines, but they are not solely responsible for the declines. 

The model indicates that the total dollar impact on exports for all of these twenty manufacturing 

industries was approximately $11.5 billion per year.

Table 3: Growth in Energy Prices and Manufacturing Exports 

NAICS Three-Digit Industry Historical, Total 

% Change in 

Exports 

% Change in 

Energy Price 

Modeled % 

Change in 

Exports 

Modeled Change 

in Exports 

(Million USD) 

Food Products 14.11% 28.12% -1.18% -333.6

Tobacco and Beverages -3.56% 41.22% -0.52% -20.7

Textile Mills 2.76% 16.33% -2.01% -166.6

Textile Product Mills 21.90% 37.08% -1.55% -32.6

Apparel Manufacturing -38.11% 33.50% -0.78% -47.9

Leather and Allied Products 6.69% 56.63% -1.74% -39.9

Wood Products 16.05% 147.54% -12.73% -539.0

Paper Manufacturing 17.63% 18.14% -2.16% -330.7

Printing 14.71% 11.34% -0.39% -20.0

Chemicals 48.03% 85.16% -5.27% -4,614.4

Rubber and Plastic Products 19.32% 20.15% -1.22% -210.8

Non-Metallic Mineral Products 14.99% 40.14% -5.00% -337.8

Primary Metals 115.21% 42.13% -9.10% -1,568.7

Fabricated Metal Products 28.87% 17.38% -0.79% -166.2

Machinery 39.21% 33.43% -0.72% -569.5

Computer and Electronics 3.55% 74.66% -1.19% -1,554.6

Electrical Equipment 35.90% 33.95% -0.89% -205.6

Transportation Equipment 28.09% 21.16% -0.44% -617.6

Furniture 30.56% 59.31% -1.52% -36.7

Miscellaneous Manufacturing 44.29% 13.43% -0.21% -49.6
Manufacturing and Services Economics Brief No. 7 

6 Energy Costs and Export Performance – April 2012

Estimates of the Historical Impacts for the Six-Digit Industries 

 I reapply this analysis for eight more disaggregated, relatively energy-intensive, six-digit 

industries within the Paper, Chemicals, and Non-Metallic Mineral industries. Six of these eight 

disaggregated industries were analyzed in an earlier Department of Commerce study on energyintensive, trade-exposed industries.3

 The six-digit industries with the highest export elasticities 

also have the highest energy cost shares (Table 4). 

Table 4: Elasticity Estimates for Energy-Intensive Six-Digit Industries 

NAICS Six-Digit Industry Energy Cost 

Share 

 (௜ߠ)

Product Price 

Elasticity of 

Export Demand 

 (௜ߛ)

Energy Price 

Elasticity of 

Export Demand 

 (௜ߝ)

Pulp Mills (322110) 0.113 -1.336 -0.150 

Paperboard Mills (322130) 0.167 -1.581 -0.264 

Industrial Gas (325120) 0.289 -1.031 -0.298 

Plastics and Resins (325211) 0.062 -2.487 -0.154 

Nitrogenous Fertilizer (325311) 0.207 -2.433 -0.502 

Phosphatic Fertilizer (325312) 0.048 -2.970 -0.144 

Glass Containers (327213) 0.182 -1.201 -0.218 

Cement (327310) 0.292 -1.057 -0.309 

 

3

 Nicholson, Michael (2010), Manufacturing and Services Economics Brief No. 1 provides an analysis of trade and 

employment of the Pulp Mills, Paperboard Mills, Plastics and Resins, Nitrogenous Fertilizer, Glass Containers, and 

Cement industries. The study also analyzes forty other energy-intensive, trade-exposed industries that are not 

included in my analysis, because the MECS and/or ASM data are not publicly available. 
International Trade Administration 

Energy Costs and Export Performance 7 

 The three industries with the largest modeled percentage changes in exports are in 

Chemicals. They have the largest percentage changes in their price of energy and this, rather 

than the product price elasticities, determines the relative ranking (Table 5). The modeled 

percentage changes in exports for the six-digit industries (Table 5) are all larger in absolute value 

than the modeled percentage change for the corresponding three-digit industry (Table 3). The 

total dollar impact on exports for these eight six-digit industries was approximately $3.6 billion 

per year. 

Table 5: Modeled Growth in Exports in Six-Digit Industries 

In constant 2006 U.S. Dollars 

NAICS Six Digit Industry Historical, Total % 

Change in Exports 

% Change in Energy 

Price ܲ෠

Modeled % Change 

in Exports ܺ෠

Pulp Mills 17.93% 33.13% -4.98%

Paperboard Mills 36.98% 49.77% -13.14%

Industrial Gas 35.92% 103.74% -30.89%

Plastics and Resins 59.35% 103.53% -15.93%

Synthetic Rubber 65.27% 46.82% -4.79%

Nitrogenous Fertilizer 24.40% 101.07% -50.79%

Phosphatic Fertilizer 39.01% 74.18% -10.66%

Glass Containers -2.96% 49.47% -10.79%

Cement 74.38% 31.41% -9.71%

Conclusion 

 The economic model in this brief demonstrates that energy prices have had a significant 

effect on the export performance of the U.S. manufacturing sector. The increase in energy prices 

between 2002 and 2006 limited the expansion of exports over that time period. The effects vary 

across industries based on energy intensities and the price elasticities of demand for U.S. 

products in foreign markets. The total impact on U.S. non-petroleum manufacturing exports 

during this period was a reduction of approximately $11.5 billion per year. According to this 

estimate, the increase in the industries’ exports of $622 billion between 2002 and 2006 would 

have been approximately $11.5 billion per year higher absent the increase in energy prices. 
Manufacturing and Services Economics Brief No. 7 

8 Energy Costs and Export Performance – April 2012

The industry-level elasticity estimates can also be applied on a prospective basis to 

evaluate the effect of a policy-related change in energy prices on the export performance of the 

U.S. manufacturing sector. For example, the model provides an analytical tool for evaluating the 

impact of a country-specific tax or subsidy on industrial energy use, a country-specific 

improvement in industrial energy efficiency, or national energy resource development (to the 

extent that it affects the industries’ price of energy). 

 
International Trade Administration 

Energy Costs and Export Performance 9 

Technical Appendix 

 This appendix provides the formulas for calibrating the shares and elasticities in Tables 2 

and 4. The elasticity of a U.S. industry’s exports with respect to its price of energy (࢏ࢿ (depends 

on the industry’s energy share of marginal costs (࢏ࣂ (and the price elasticity of the demand for 

the industry’s products in export markets (࢏ࢽ(. The latter depends on the elasticity of substitution 

between the industry’s products from different countries (࢏࣌ (and the U.S. share of total 

expenditures the industry’s products in export markets (࢏ࡿ(. The formulas are as follows:4

ߛ ௜ൌ ሺ1െߪ௜ሻሺ1െܵ௜ሻ ൏ 0

 0 ൏ ௜ߠ ௜ߛ ൌ௜ ߝ

These formulas assume that the change in energy prices is country-specific. If there were 

parallel changes in the energy prices paid by foreign competitors, then the export elasticity 

would be lower than the value in this equation.

I calibrate the parameters of this model for each industry using annual measures of each 

industry’s value of exports, imports, and total shipments, and the industry’s labor costs, cost of 

purchased fuel and electricity, and other costs of production in 2002. The formulas are as 

follows: 

ߪ ௜ൌ ்௏ௌ೔

்௏ௌ೔ି௅஼ைௌ்೔ିெ஼ைௌ்೔

 

ܸܶܵ௜ is the total value of shipments of industry ݅, ܥܮܱܵܶ ௜is industry’s payroll, and ܥܯܱܵܶ ௜is 

the industry’s total cost of materials. 

ߠ ௜ൌ ா஼ைௌ்೔

௅஼ைௌ்೔ାெ஼ைௌ்೔

 

ܥܧܱܵܶ ௜is the cost of purchased energy (i.e., purchased fuel and purchased electricity per BTU) 

of industry ݅. ܥܯܱܵܶ ௜is the industry’s cost of materials. 

 

4

 A more detailed derivation of these formulas is available from the author upon request. 
Manufacturing and Services Economics Brief No. 7 

10 Energy Costs and Export Performance – April 2012

௜ܺܲܧ ൌ௜ ܵ

ቂቀ்௏ௌ೔ିா௑௉೔ାூெ௉೔

ீ஽௉ೆೄ

ቁ ∑௖ஷ௎ௌ ܦܩܲ௖ቃ ൘ 

ܧܺܲ ௜is the FAS value of domestic exports of industry ݅ products to all countries, and ܯܫܲ ௜is the 

total landed duty-paid value of U.S. industry ݅ imports for consumption from all countries in the 

same year. ܦܩܲ ௖is a measure of Gross Domestic Product in country ܿ from United Nations’ 

annual statistics. 
International Trade Administration 

Energy Costs and Export Performance 11 

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