IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-02469516.html
   My bibliography  Save this paper

Is the price effect on fuel consumption symmetric ? Some evidence from an empirical study

Author

Listed:
  • Elodie Sentenac-Chemin

    (IFPEN - IFP Energies nouvelles, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

Abstract

We generally consider that the price elasticity of the energy demand is quite small. But it appears that strong increases in gasoline price lead to modifications in consumer behaviours. The high volatility of petroleum prices and thus gasoline prices and the strong increases since the beginning of 2000 justify an analysis of price effects on gasoline consumption. Thus, in this paper, we estimate the effects of price variations on gasoline consumption, in the short and the long-term, in two countries: the United States and India. We use a co-integration modelling to test for long-run relationship between gasoline consumption, income, price and vehicle ownership in the two countries. We use an error correction model to test for short-run prices effects and more precisely for asymmetric effects on demand of increases and decreases in gasoline prices. The main conclusions are the following. - The United States: (1) The long-term price elasticity is relatively high for an industrialised country because gasoline taxes are low (2) Households are more sensitive to a price increase than a price decrease. - India: (1) Price elasticity in the long-run is quite high but is quite small in the short – run. It is not surprising for an emergent country (2) It seems that there is no asymmetric effect of price variations on gasoline consumption.

Suggested Citation

  • Elodie Sentenac-Chemin, 2009. "Is the price effect on fuel consumption symmetric ? Some evidence from an empirical study," Working Papers hal-02469516, HAL.
    • Handle: RePEc:hal:wpaper:hal-02469516
    Note: View the original document on HAL open archive server: https://ifp.hal.science/hal-02469516
    as

    Download full text from publisher

    File URL: https://ifp.hal.science/hal-02469516/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rudolf Wolffram, 1971. "Positivistic Measures of Aggregate Supply Elasticities: Some New Approaches—Some Critical Notes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 53(2), pages 356-359.
    2. Bruce Traill & David Colman & Trevor Young, 1978. "Estimating Irreversible Supply Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(3), pages 528-531.
    3. James M. Griffin & Craig T. Schulman, 2005. "Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-22.
    4. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
    5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    6. Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
    7. Raúl O'Ryan & Daniel Sperling & Tom Turrentine & Mark Delucchii, 2001. "Transportation in Developing Countries: Greenhouse Gas Scenarios for Chile," Documentos de Trabajo 111, Centro de Economía Aplicada, Universidad de Chile.
    8. Robert McRae, 1994. "Gasoline Demand in Developing Asian Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 143-156.
    9. Bose, Ranjan & Sperling, Daniel & Delucchi, Mark A. & Nesamani, K S & Redmond, Lothlorien S & Schipper, Lee & Tiwari, Geetam, 2001. "Transportation in Developing Countries: Greenhouse Gas Scenarios for Delhi, India," Institute of Transportation Studies, Working Paper Series qt7m97k9mg, Institute of Transportation Studies, UC Davis.
    10. Christophe Barret & Philippe Chollet, 1990. "Canadian Gas Exports : Modeling a Market in Disequilibrium," Working Papers hal-02432570, HAL.
    11. I.O. Walker & Franz Wirl, 1993. "Irreversible Price-Induced Efficiency Improvements: Theory and Empirical Application to Road Transportation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 183-205.
    12. Ramanathan, R., 1999. "Short- and long-run elasticities of gasoline demand in India: An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 21(4), pages 321-330, August.
    13. William W. Hogan, 1993. "OECD Oil Demand Dynamics: Trends and Asymmetries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 125-158.
    14. Dermot Gately, 1993. "The Imperfect Price-Reversibility of World Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 163-182.
    15. Zhou, Hongchang & Sperling, Daniel, 2001. "Transportation in Developing Countries: Greenhouse Gas Scenarios for Shanghai, China," Institute of Transportation Studies, Working Paper Series qt6g7500dg, Institute of Transportation Studies, UC Davis.
    16. Alves, Denisard C. O. & De Losso da Silveira Bueno, Rodrigo, 2003. "Short-run, long-run and cross elasticities of gasoline demand in Brazil," Energy Economics, Elsevier, vol. 25(2), pages 191-199, March.
    17. Samimi, Rodney, 1995. "Road transport energy demand in Australia: A cointegration approach," Energy Economics, Elsevier, vol. 17(4), pages 329-339, October.
    18. Dermot Gately, 1992. "Imperfect Price-Reversibility of U.S. Gasoline Demand: Asymmetric Responses to Price Increases and Declines," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 179-208.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sentenac-Chemin, Elodie, 2012. "Is the price effect on fuel consumption symmetric? Some evidence from an empirical study," Energy Policy, Elsevier, vol. 41(C), pages 59-65.
    2. Fedoseeva, Svetlana & Zeidan, Rodrigo, 2018. "How (a)symmetric is the response of import demand to changes in its determinants? Evidence from European energy imports," Energy Economics, Elsevier, vol. 69(C), pages 379-394.
    3. Huntington, Hillard G. & Barrios, James J. & Arora, Vipin, 2019. "Review of key international demand elasticities for major industrializing economies," Energy Policy, Elsevier, vol. 133(C).
    4. Scott, K. Rebecca, 2011. "Demand and Price Volatility: Rational Habits in International Gasoline Demand," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2q87432b, Department of Agricultural & Resource Economics, UC Berkeley.
    5. Reza Darisavi Bahmanshir & Ali Akbar Naji Meidani & Mahdi Khodaparast Mashhadi & Narges Salehnia, 2018. "Reversibility Test of Oil Demand Function of OECD Countries Importing Oil from Iran with an Emphasis on Technological and Environmental Considerations: Symmetric and Asymmetric Models," International Journal of Energy Economics and Policy, Econjournals, vol. 8(2), pages 132-139.
    6. Dahl, Carol A., 2012. "Measuring global gasoline and diesel price and income elasticities," Energy Policy, Elsevier, vol. 41(C), pages 2-13.
    7. Erdogdu, Erkan, 2007. "Electricity demand analysis using cointegration and ARIMA modelling: A case study of Turkey," Energy Policy, Elsevier, vol. 35(2), pages 1129-1146, February.
    8. Erdogdu, Erkan, 2010. "Natural gas demand in Turkey," Applied Energy, Elsevier, vol. 87(1), pages 211-219, January.
    9. Shaw, Charles, 2020. "Econometric Analysis of Demand for Petrol in India, 1966-2019," MPRA Paper 104797, University Library of Munich, Germany.
    10. de Freitas, Luciano Charlita & Kaneko, Shinji, 2011. "Ethanol demand under the flex-fuel technology regime in Brazil," Energy Economics, Elsevier, vol. 33(6), pages 1146-1154.
    11. Huntington, Hillard G., 2010. "Short- and long-run adjustments in U.S. petroleum consumption," Energy Economics, Elsevier, vol. 32(1), pages 63-72, January.
    12. Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
    13. Dargay, Joyce & Gately, Dermot, 1997. "The demand for transportation fuels: Imperfect price-reversibility?," Transportation Research Part B: Methodological, Elsevier, vol. 31(1), pages 71-82, February.
    14. Sene, Seydina Ousmane, 2012. "Estimating the demand for gasoline in developing countries: Senegal," Energy Economics, Elsevier, vol. 34(1), pages 189-194.
    15. Jimy Ferrer Carbonell & Roberto Escalante Semerena, 2014. "Demanda de gasolina en la zona metropolitana del Valle de México: análisis empírico de la reducción del subsidio," Revista de Economía del Rosario, Universidad del Rosario, June.
    16. Martijn Brons & Peter Nijkamp & Eric Pels & Piet Rietveld, 2006. "A Meta-analysis of the Price Elasticity of Gasoline Demand. A System of Equations Approach," Tinbergen Institute Discussion Papers 06-106/3, Tinbergen Institute.
    17. Manuel Frondel & Colin Vance, 2011. "Re-Identifying the Rebound – What About Asymmetry?," Ruhr Economic Papers 0276, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    18. Frondel, Manuel & Vance, Colin, 2013. "Re-Identifying the Rebound: What About Asymmetry?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 34(4), pages 42-54.
    19. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
    20. Robert V. Breunig & Carol Gisz, 2009. "An Exploration of Australian Petrol Demand: Unobservable Habits, Irreversibility and Some Updated Estimates," The Economic Record, The Economic Society of Australia, vol. 85(268), pages 73-91, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-02469516. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.