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Dynamic panel data approaches for estimating oil demand elasticity

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  • Afshin Javan
  • Nahl Zahran

Abstract

This study examines the general relationships between crude oil consumption, real oil price and real GDP using a quarterly time series from 1993 to 2012. Specifically, the long-term and short-term GDP and price elasticities of oil consumption per capita were estimated using dynamic panel and pooled data regressions based on Nerlove's oil demand model for 25 countries that represent 75 per cent of global oil demand. Price elasticities were found for most OECD countries. These estimates were low and consistent with previous estimates. According to the study results, the short-run price elasticity ranged between −0.05 and −0.20 and the long-run between −0.11 and −0.36. Price elasticities for most non-OECD countries were either positive or insignificant. Estimates of GDP elasticities varied. The short-run GDP elasticity was between 0.15 and 1.09, while the long-run was between 0.21 and 1.54. On average, income elasticity for OECD countries was found to be slightly higher than for non-OECD countries. Contrary to expectations, we found China's income elasticity to be 0.34 in the short run, but it was 0.76 in the long run.

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  • Afshin Javan & Nahl Zahran, 2015. "Dynamic panel data approaches for estimating oil demand elasticity," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 39(1), pages 53-76, March.
    • Handle: RePEc:bla:opecrv:v:39:y:2015:i:1:p:53-76
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    File URL: http://hdl.handle.net/10.1111/opec.12040
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    Cited by:

    1. Arampatzidis, Ioannis & Panagiotidis, Theodore, 2023. "On the identification of the oil-stock market relationship," Economic Modelling, Elsevier, vol. 120(C).
    2. Ansari, Dawud, 2017. "OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 111, pages 166-178.
    3. Eleyan, Mohammed I.Abu & Çatık, Abdurrahman Nazif & Balcılar, Mehmet & Ballı, Esra, 2021. "Are long-run income and price elasticities of oil demand time-varying? New evidence from BRICS countries," Energy, Elsevier, vol. 229(C).
    4. Lomonosov, Daniil & Polbin, Andrey & Fokin, Nikita, 2020. "Влияние Шоков Мировой Деловой Активности, Предложения Нефти И Спекулятивных Нефтяных Шоков На Экономику Рф [The impact of global economic activity, oil supply and speculative oil shocks on the Russ," MPRA Paper 106019, University Library of Munich, Germany.
    5. Berk, Istemi & Çam, Eren, 2020. "The shift in global crude oil market structure: A model-based analysis of the period 2013–2017," Energy Policy, Elsevier, vol. 142(C).
    6. Samih Antoine Azar & Angelic Salha, 2017. "The Bias in the Long Run Relation between the Prices of BRENT and West Texas Intermediate Crude Oils," International Journal of Energy Economics and Policy, Econjournals, vol. 7(1), pages 44-54.
    7. Yousaf Raza, Muhammad & Lin, Boqiang, 2021. "Oil for Pakistan: What are the main factors affecting the oil import?," Energy, Elsevier, vol. 237(C).
    8. Ozturk, Ilhan & Arisoy, Ibrahim, 2016. "An estimation of crude oil import demand in Turkey: Evidence from time-varying parameters approach," Energy Policy, Elsevier, vol. 99(C), pages 174-179.
    9. Berk, Istemi & Çam , Eren, 2019. "The Shift in Global Crude Oil Market Structure: A model-based analysis of the period 2013–2017," EWI Working Papers 2019-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    10. Daniil Lomonosov & Andrey Polbin & Nikita Fokin, 2021. "The Impact of Global Economic Activity, Oil Supply and Speculative Oil Shocks on the Russian Economy," HSE Economic Journal, National Research University Higher School of Economics, vol. 25(2), pages 227-262.

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