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Transportation oil demand, consumer preferences and asymmetric prices

Author

Listed:
  • David C. Broadstock
  • Alan Collins
  • Lester C. Hunt

Abstract

Purpose - The aim of this paper is to establish the role of asymmetric price decompositions in UK road transportation fuel demand, make explicit the impact of the underlying energy demand trend, and disaggregate the estimation for gasoline and diesel demand as separate commodities. Design/methodology/approach - Dynamic UK transport oil demand functions are estimated using the Seemingly Unrelated Structural Time Series Model with decomposed prices to allow for asymmetric price responses. Findings - The importance of starting with a flexible modelling approach that incorporates both an underlying demand trend and asymmetric price response function is highlighted. Furthermore, these features can lead to different insights and policy implications than might arise from a model without them. As an example, a zero elasticity for a price‐cut is found (for both gasoline and diesel), implying that price reductions do not induce demand for road transportation fuel in the UK. Originality/value - The paper illustrates the importance of joint modelling of gasoline and diesel demand incorporating both asymmetric price responses and stochastic underlying energy demand trends.

Suggested Citation

  • David C. Broadstock & Alan Collins & Lester C. Hunt, 2011. "Transportation oil demand, consumer preferences and asymmetric prices," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(5), pages 528-536, September.
    • Handle: RePEc:eme:jespps:v:38:y:2011:i:5:p:528-536
    DOI: 10.1108/01443581111161797
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    Citations

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    Cited by:

    1. Alptekin, Aynur & Broadstock, David C. & Chen, Xiaoqi & Wang, Dong, 2019. "Time-varying parameter energy demand functions: Benchmarking state-space methods against rolling-regressions," Energy Economics, Elsevier, vol. 82(C), pages 26-41.
    2. Rodrigues, Niágara & Losekann, Luciano & Silveira Filho, Getulio, 2018. "Demand of automotive fuels in Brazil: Underlying energy demand trend and asymmetric price response," Energy Economics, Elsevier, vol. 74(C), pages 644-655.
    3. Atalla, Tarek N. & Gasim, Anwar A. & Hunt, Lester C., 2018. "Gasoline demand, pricing policy, and social welfare in Saudi Arabia: A quantitative analysis," Energy Policy, Elsevier, vol. 114(C), pages 123-133.
    4. Asif Ahmed & Rossazana Ab-Rahim, 2021. "A Literature Review on the Relatiohship between Competition and Efficiency for Takaful and Conventional Insurance," Journal of Public Administration and Governance, Macrothink Institute, vol. 11(4), pages 130139-1301, December.
    5. Emmanuel Kwabena Anin & Jonathan Annan & Alexander Fianko Otchere, 2013. "Evaluating the Role of Mass Transit and its Effect on Fuel Efficiency in the Kumasi Metropolis, Ghana," International Journal of Business and Social Research, LAR Center Press, vol. 3(3), pages 107-116, March.
    6. Dilaver, Zafer & Hunt, Lester C., 2021. "Modelling U.S. gasoline demand: A structural time series analysis with asymmetric price responses," Energy Policy, Elsevier, vol. 156(C).

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