Energy Substitution in the Gulf of Mexico Shrimp Fishery

Since 1973, the U.S. economy has shifted from a ability in the fishing industry have been conducted. The position characterized by abundant and low-cost enlack of studies on the substitution possibilities between ergy to one of rising energy prices and fragile energy energy and nonenergy inputs leaves a void in the apsupplies, periodically threatened by an unstable forpropriate information upon which public policy, busieign political environment. ness management, and investment decisions can be Since competitive firms choose the bundle of inputs made. that minimizes the total cost of producing a given level In this paper, the elasticities of substitution among of output, higher fuel prices induce an increase in lafuel, capital, and labor are estimated for the Gulf of bor and capital inputs and a decrease in energy input to Mexico Shrimp fishery. Fuel costs in the Gulf shrimp the extent that substitution is possible. High fuel prices fishery account for a relatively high percentage of total encourage energy efficiency through greater capital costs compared to other kinds of fishing (Noetzel; investment with a corresponding reduction in unit cost. Penn). The equipment used to harvest shrimp is diExamples of such investments are retrofitting existing verse and fuel efficiencies differ with type vessel, vesequipment, developing new equipment, or both. sel size, and the area shrimped. Elasticities of A central issue of energy policy, planning, and analsubstitution will be estimated for different vessel sizes ysis is the extent to which other factors of production by specifying the translog cost function fit to observed can be substituted for energy. This can be measured by data. deriving appropriate elasticities of substitution. If energy and capital are substitutable, then advancing relative prices of energy will increase demand for new DESCRIPTION OF THE FISHERIES capital goods. In this case, investment incentives, such as tax credits or accelerated depreciation allowances, The states bounding the Gulf of Mexico (Figure 1), will reduce the price of capital and generate an inFlorida, Alabama, Mississippi, Louisiana, and Texas, creased demand for capital and a decreased demand for produced approximately 61 percent (208.3 million energy, thereby further expediting the adjustment propounds) of U.S. shrimp landings (339.7 million cess. Conversely, if it is found that possibilities for pounds) in 1980. The cost of fuel has become the most substitution between energy and nonenergy inputs are rapidly increasing and perhaps the largest single item limited, the unit cost of output will rise as energy prices of cost. Fuel costs tripled between 1971 and 1977, and rise. fuel prices increased approximately 88 percent from The estimation of substitution elasticities among en1977 to 1980. Consequently, fuel costs for a 66-70-ft. ergy and nonenergy inputs is the subject of several curvessel, as a percent of total costs, increased from 9 rent economic studies in manufacturing processes. percent in 1971 to 32 percent in 1980, while labor costs Studies on energy substitution have been done by Berndt and Wood, Halvorsen and Ford, and Field and Grebenstein for the United States; by Fuss for Canada; _ ----and by Griffin and Gregory, and Pindyck for several countries. Capital and energy have been shown to be good substitutes in many industries. Hence, conser, I \ vation efforts on the replacement of vintage facilities \ seem well advised. The energy share of total cost is generally much higher in fishing than in manufacturing. Moreover, / unlike manufacturing, the fishing industry is based on seasonal biological processes. Any disruption in the ... availability of fuel at a reasonable price during the fishing season is likely to adversely affect the fishing Figure 1. Statistical Area Used in Reporting Gulf industry because production cannot be made up in the Coast Shrimp Data off-season. However, no studies on energy substitut-