Smaller and smaller? The price responsiveness of nontransport oil demand
Despite a sharp decrease in world oil prices in 1986 that was sustained for almost 15 years, nontransport oil demand growth has remained rather weak in most industrialized countries. We implement various approaches to modeling this observed phenomenon using data for Canada, France, Japan, the U.K., and the U.S. In general, we find that nontransport oil demand has become less responsive to own-price changes, and that specifications allowing for different components of prices to induce different demand responses tend to dominate specifications that exclude this feature. Further, incorporating this feature in a model that allows elasticities to vary over time appears to provide a more appealing characterization of the evolution of nontransport oil demand during the last three decades.
|Journal||Quarterly Review of Economics and Finance|
Ryan, D.L. (David L.), & Plourde, A. (2002). Smaller and smaller? The price responsiveness of nontransport oil demand. Quarterly Review of Economics and Finance, 42(2), 285–317. doi:10.1016/S1062-9769(02)00131-X