equivalent) is from the World Development Indicators database. Crude oil (Brent) prices (in US dollars per barrel) are from British Petroleum.

Inspection of table 1, which reports the results for the less flexible model, indicates that the only sample where oil prices appear to Granger cause oil intensities is the OECD. In Latin America, other middle income countries, and the world as a whole the parameter of the variable capturing changes in oil prices does not come close to being significant (i.e. we cannot reject the null hypothesis of no Granger causality).

Clearly, one could argue that these results are driven by the particular specification used. Yet, when we inspect table 2, which is based on model (2), the results are in line with those in table 1 except for the sample including all the countries (which admittedly could be driven by the OECD sample), although with a qualification. In fact, it seems that there are important asymmetric effects associated to price increases and price declines. In fact, price declines seem to have no effect on oil intensities.

Table 3 goes one step beyond and present the results of our more general model. It suggests that price increases above the maximum historical price have a significant and negative impact only in the world and OECD countries. In the latter case, the cumulative sub-maximum price recoveries also have a negative and significant effect on oil intensity. However, when we test the equality of both coefficients, i.e. β _1=_ β _3_ , we find that they are not statistically different. This may suggest that even though oil demand (as measured by oil consumption per capita) responds differently to price recoveries (Gately and Huntington, 2001; Dargay, Gately, and Huntington, 2007) than to price beyond historical maximum, the oil intensity is equally affected by both types of price increases. On the contrary, when we look at price decreases we cannot reject the null of no causality.

Are these results, at least those for the OECD, driven by overall energy efficiency gains or instead by a switch in energy sources? To address this question we now re estimate the previous models but using overall energy intensity (rather than oil intensity) as our variable of interest. The results for these models are in tables 4 to 6. They indicate that while in principle it is may be possible that in OECD countries there is a switch between energy sources, it is also the case that when oil prices increase, OECD countries experience a gain in overall energy efficiency levels.

# **IV. Why is it that in Latin American countries intensities do not react to prices?**

What can be the reason that makes the Latin American countries behave in a different way than the OECD countries and in a similar way to the middle income counties? Although the analysis in the preceding section cannot be used to give an answer to this question, one can put forward some hypotheses. For example, to the extent that oil price changes are not passed through to consumers and instead are covered by, for example, public subsidies it could be argued that oil prices may not dramatically affect consumption or efficiency levels, as individuals may not have the right incentives to save on energy.

7