Structural Breaks and Petroleum Consumption in US States: Are Shocks Transitory or Permanent?

Abstract

This short communication extends the literature on the stationarity of energy consumption to the case of US petroleum consumption at the state level from 1960 to 2007. The results of Lee and Strazicich (2003) and Narayan and Popp (forthcoming) unit root tests with endogenously determined structural breaks in the intercept and slope of the trend function reveal break dates that correspond to the two OPEC oil shocks of the 1970s along with the double-dip recession of 1980–1982. The null hypothesis of a unit root in petroleum consumption is rejected for a majority of states. These results highlight the importance of recognizing the heterogeneity in the behavior of petroleum consumption across states in the formulation of energy conservation and demand management policies.