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Price and Income Elasticities of Demand for Oil Products in African Member Countries of OPEC: A Cointegration Analysis

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  • Suleiman, Sa’ad
  • Muhammad, Shahbaz

Abstract

This paper analyses the demand for petroleum products in African member countries of OPEC namely Algeria, Angola, Libya and Nigeria over the period of 1980-2007. For this purpose, econometric models based on time series data are generated for individual products so as to capture product specific factors affecting demand. In doing so, the ARDL bounds testing approach to cointegration is applied to examine the long run relationship among the variables. Four specifications such as total petroleum product demand function, gasoline demand function, diesel demand function and kerosene demand functions have been estimated. The review of trends in the consumption and real prices of the various products suggest that demand for oil products has risen fast due to fast rise in income levels of individuals in these countries as compared to price level. Furthermore, results of estimation show mixed evidence about cointegration between the variables in all the countries studied. The evidence from the estimates show that the diesel demand specification provided satisfactory results in terms of producing expected signs than other specifications. The results for the kerosene model was the least satisfactory as most of the coefficients were found with unexpected signs. Finally the overall result indicates that demand for oil products are more responsive to changes in income than the real prices, both in the short and long run. This result is consistent with the previous studies on developing countries. Finally, the policy implication for result show the need for diversification, increase refining capacity and demand management policies in these countries to promote energy efficiency, conservation as well as discourage cross border smuggling of products and encourage private investment into the oil sector.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37390.

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Date of creation: 03 Jan 2012
Date of revision: 28 Feb 2012
Handle: RePEc:pra:mprapa:37390

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Keywords: Petroleum product demand; ARDL procedure;

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Cited by:
  1. Mohamed El Hedi Arouri & Adel Ben Youssef & Hatem M'Henni & Christophe Rault, 2014. "Energy use and economic growth in Africa: a panel Granger-causality investigation," Economics Bulletin, AccessEcon, vol. 34(2), pages 1247-1258.
  2. Atil, Ahmed & Lahiani, Amine & Nguyen, Duc Khuong, 2014. "Asymmetric and nonlinear pass-through of crude oil prices to gasoline and natural gas prices," Energy Policy, Elsevier, Elsevier, vol. 65(C), pages 567-573.
  3. Walid Chkili & Chaker Aloui & Duc Khuong Nguyen, 2014. "Instabilities in the relationships and hedging strategies between crude oil and US stock markets: do long memory and asymmetry matter?," Working Papers, Department of Research, Ipag Business School 2014-549, Department of Research, Ipag Business School.
  4. Besma Talbi & Duc Khuong Nguyen, 2014. "An empirical analysis of energy demand in Tunisia," Working Papers, Department of Research, Ipag Business School 2014-495, Department of Research, Ipag Business School.
  5. Suleiman Sa ad & Muhammad Shahbaz, 2014. "Price and Income Elasticities of Demand for Oil Products in African Member Countries of OPEC: A Cointegration Analysis," Working Papers, Department of Research, Ipag Business School 2014-486, Department of Research, Ipag Business School.
  6. Ahdi N. Ajmi & Shawkat Hammoudeh & Ahmed A. A. Khalifa & Duc K. Nguyen, 2014. "Causality across international equity and commodity markets: When asymmetry and nonlinearity matter," Working Papers, Department of Research, Ipag Business School 2014-546, Department of Research, Ipag Business School.
  7. Duc Khuong Nguyen & Ricardo M. Sousa & Gazi Salah Uddin, 2014. "Testing for asymmetric causality from U.S. equity returns to commodity futures returns," Working Papers, Department of Research, Ipag Business School 2014-545, Department of Research, Ipag Business School.
  8. Shahbaz, Muhammad & Sbia, Rashid & HAMDI, Helmi & Ur Rehman, Ijaz, 2014. "The Role of Information Communication Technology and Economic Growth in Recent Electricity Demand: Fresh Evidence from Combine Cointegration Approach in UAE," MPRA Paper 53226, University Library of Munich, Germany, revised 25 Jan 2014.
  9. Anis Omri & Duc Khuong Nguyen, 2014. "On the determinants of renewable energy consumption: International Evidence," Working Papers, Department of Research, Ipag Business School 2014-535, Department of Research, Ipag Business School.
  10. Martin de Wit & Matthew Kuperus Heun & Douglas J Crookes, 2013. "An overview of salient factors, relationships and values to support integrated energy-economic systems dynamic modelling," Working Papers 02/2013, Stellenbosch University, Department of Economics.
  11. Mohamed Arouri & Christophe Rault & Frederic Teulon, 2014. "Economic policy uncertainty, oil price shocks and GCC stock markets," Working Papers, Department of Research, Ipag Business School 2014-547, Department of Research, Ipag Business School.
  12. Zied Ftiti & Aviral Tiwari & Amél Belanès & Khaled Guesmi, 2014. "Tests of Financial Market Contagion: Evolutionary Cospectral Analysis V.S. Wavelet Analysis," Working Papers, Department of Research, Ipag Business School 2014-577, Department of Research, Ipag Business School.
  13. Ihtisham Abdul Malik & Ghamz-e-Ali Siyal & Alias Bin Abdullah & Arif Alam & Khalid Zaman, 2014. "Turn on the Lights: Macroeconomic Factors Affecting Renewable in Pakistan," Working Papers, Department of Research, Ipag Business School 2014-518, Department of Research, Ipag Business School.
  14. Lanouar Charfeddine & Rafik Jbir & Jihane Karboul, 2014. "Price convergence and integration in the Germany, France and Italy electricity markets," Working Papers, Department of Research, Ipag Business School 2014-502, Department of Research, Ipag Business School.

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