Hot Wired or Wood Fired?
Determinants of Fuel Choice in Indonesia

Mira Manickam

This study uses large-scale survey data for the country of Indonesia to determine the effects of fuel prices and other variables on the mix of fuels a household decides to consume and how these effects vary with fuel budget size and household size. Tobit regression analysis is used to separate out the effects of fuel prices and various regional and demographic household characteristics on the demands for electricity, kerosene, firewood, and charcoal. Fuels' own prices were found to have a substantial impact on reducing fuel demand, particularly among households with small fuel budgets, while cross-price elasticities with respect to kerosene prices were significant at extremes of fuel budget size. Other variables found to have strong effects on household fuel consumption were the fuel budget size, the level of electricity availability in a household's kabupaten (regency), and whether a household was rural or urban. Demand responses to electricity availability and whether a household was rural or urban were more extreme at higher levels of fuel expenditure.