How has dematerialization contributed to reducing oil price pressure? A qualitative Lnput#output analysis for the Japanese economy during 1990#2000

The evolution of crude oil use structure and its impacts on commodity prices are examined for Japanese economy between 1990 and 2000. We found that the out-degree of the production network, indicating the extent of the pressure on prices of downstream industries in response to higher crude oil prices, decreased in several sectors between 1990 and 2000. The results by sector showed that the decrease was greatest in the chemical product- and iron and steel manufacturing sectors, which both indirectly use crude oil. The decrease in outdegree is considered to have been caused by improved efficiency in the production of oil-related products and increase in energy savings by the manufacturing facilities in these sectors. In addition, many of the sectors having a high out-degree engage in intermediate product production. Conversely, the in-degree, which represents the extent of being pressured by other sectors with increased crude oil prices, also decreased during the period between 1990 and 2000. From the result of the in-degree, this study found that dematerialization and weight reduction of final products such as "cellular phones" and "personal computers" had a marked effect on decreasing indegree. More importantly, for the top-ranked sectors with the high out-degree and in-degree, such as "aliphatic intermediates", "chemical fertilizers", "plastic products", "hot rolled steel", "yarn and fabric dyeing and finishing", the results suggest that the pressure due to rising crude oil prices can be more effectively eased by implementing measures targeted at upstream products and sectors, while current policy measures to alleviate oil-price induced inflation are mainly targeted at downstream products such as gasoline.