Electricity, gas, and transportation fuels are an important component of the household budget. Its use for lighting, heating, cooling, and cooking exemplify some of the basic activities that require a reliable supply. The importance of such services in the family budget reflects its relevance and constitutes a dimension of interest for public policies that seek to guarantee the affordability of modern energy sources.
A recent IDB study examines spending on electricity, domestic gas, and fuels for private transportation in households in 13 countries in the Region. Together, direct expenditures on such energy sources constitute about 8.2% of the average Latin American household, where electricity represents 3.3%, domestic gas 2%, and fuel for private transportation 2.9%. However, these figures have sharp differences between countries and income groups. For example, the first quintile of the population (20% of lower income) in Jamaica and Uruguay devote 10 and 15.6% of their income to energy consumption, respectively. Moreover, in the entire sample analyzed, 30% of the population with low incomes devotes more than 10% of their budgets to energy expenditures. This situation indicates substantial affordability problems concentrated in the lower income segments.
The composition of energy expenditure is also very different among income groups. In the first quintile, electricity and gas account for more than 80% of their total energy expenditure. On the other hand, in the higher income group, these sources account for only 36%, while the difference is liquid fuels for transportation (i.e. gasoline, diesel, LPG, etc.). This change in composition reflects the increasing ownership and use of motor vehicles, being a relevant dimension to account for in policies regarding energy pricing and subsidies.
Similarly, the high concentration of aggregate energy expenditures in high-income groups is notable. For example, 20% of households with higher incomes account for around 40% of aggregate expenditure on energy. This gap is even more pronounced in the case of aggregate expenditure on transport fuels, where this group accounts for over 80% of the total.
These are general patterns common to most contexts. However, each country presents different particularities and challenges that need to be addressed in depth to improve the management of energy demand, as well as our pricing policies.
These are general patterns common to most contexts. However, each country presents different particularities and challenges that need to be addressed in depth to improve the management of energy demand, as well as our pricing policies.
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