FEDS Paper: Energy Consumption and Inequality in the U.S.: Who are the Energy Burdened?

Octavio M. Aguilar and Cristina Fuentes-AlberoUsing a broad definition of energy consumption that includes both residential energy use and gasoline for transport, we identify 20% of households in the PSID as energy burdened (EB) based on a twice-the-median, income-based threshold. Logit analysis shows that being nonwhite, being single with dependents, receiving public assistance, having no post-secondary education, and being unemployed increase the probability of being EB. We document four key empirical facts: (1) EB/non-EB status is persistent; (2) EB households have significantly higher marginal propensities to consume and marginal propensities to consume energy compared to non-EB households; (3) EB households experience lower expected energy consumption growth despite having higher expected income growth relative to non-EB households; and (4) EB households face more volatile energy consumption and income than non-EB households. Lastly, we show that both consumption inequality and energy consumption inequality have risen more moderately than income inequality over the 1999 to 2021 period. Inequality in residential energy consumption increased until 2009, then declined, whereas inequality in gasoline consumption for transport has risen steadily, reaching a level 50% higher in 2021 than in 1999.