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Gasoline demand, pricing policy and social welfare in the Islamic Republic of Iran

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  • Majid Ahmadian
  • Mona Chitnis
  • Lester C. Hunt

Abstract

This study estimates the gasoline demand function for the Islamic Republic of Iran, using the structural time series model over the period 1968‐2002, and uses it to estimate the change in social welfare for 2003 and 2004, of a higher gasoline price policy. It is found that short‐ and long‐run demand price elasticities are inelastic, although the response is greater in the long run. Hence, social welfare is estimated to fall because of the higher gasoline price (ceteris paribus). However, allowing all variables in the model to change, social welfare is estimated to increase since the changes in the other variables more than compensate for the negative effects of the policy.

Suggested Citation

  • Majid Ahmadian & Mona Chitnis & Lester C. Hunt, 2007. "Gasoline demand, pricing policy and social welfare in the Islamic Republic of Iran," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 31(2), pages 105-124, June.
    • Handle: RePEc:bla:opecrv:v:31:y:2007:i:2:p:105-124
    DOI: 10.1111/j.1468-0076.2007.00179.x
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    Cited by:

    1. 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.
    2. Raghoo, Pravesh & Surroop, Dinesh, 2020. "Price and income elasticities of oil demand in Mauritius: An empirical analysis using cointegration method," Energy Policy, Elsevier, vol. 140(C).
    3. Moshiri, Saeed, 2015. "The effects of the energy price reform on households consumption in Iran," Energy Policy, Elsevier, vol. 79(C), pages 177-188.
    4. Mohamad Taghvaee, Vahid & Hajiani, Parviz, 2014. "Price and Income Elasticities of Gasoline Demand in Iran: Using Static, ECM, and Dynamic Models in Short, Intermediate, and Long Run," MPRA Paper 70054, University Library of Munich, Germany.
    5. Aldubyan, Mohammad & Gasim, Anwar, 2021. "Energy price reform in Saudi Arabia: Modeling the economic and environmental impacts and understanding the demand response," Energy Policy, Elsevier, vol. 148(PB).
    6. Mir Hossein Mousavi, 2015. "An Estimation of Natural Gas Demand in Household Sector of Iran; the Structural Time Series Approach," Proceedings of International Academic Conferences 2804383, International Institute of Social and Economic Sciences.
    7. Aliyu Barde Abdullahi, 2014. "Modeling Petroleum Product Demand in Nigeria Using Structural Time Series Model (STSM) Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 427-441.
    8. Gately, Dermot & Al-Yousef, Nourah & Al-Sheikh, Hamad M.H., 2013. "The rapid growth of OPEC′s domestic oil consumption," Energy Policy, Elsevier, vol. 62(C), pages 844-859.
    9. Adeyemi, Olutomi I. & Broadstock, David C. & Chitnis, Mona & Hunt, Lester C. & Judge, Guy, 2010. "Asymmetric price responses and the underlying energy demand trend: Are they substitutes or complements? Evidence from modelling OECD aggregate energy demand," Energy Economics, Elsevier, vol. 32(5), pages 1157-1164, September.
    10. Kakali Kanjilal & Sajal Ghosh, 2018. "Revisiting income and price elasticity of gasoline demand in India: new evidence from cointegration tests," Empirical Economics, Springer, vol. 55(4), pages 1869-1888, December.
    11. Afshin Ghorbani & Mohammad Reza Rahimpour & Younes Ghasemi & Sona Raeissi, 2018. "The Biodiesel of Microalgae as a Solution for Diesel Demand in Iran," Energies, MDPI, vol. 11(4), pages 1-17, April.
    12. 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).
    13. Sa'ad, Suleiman, 2009. "An empirical analysis of petroleum demand for Indonesia: An application of the cointegration approach," Energy Policy, Elsevier, vol. 37(11), pages 4391-4396, November.
    14. Asghar Shahmoradi & Afshin Honarvar, 2008. "Gasoline subsidy and consumer surplus in the Islamic Republic of Iran," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 32(3), pages 232-245, September.
    15. Vahid Mohamad Taghvaee & Abbas Assari Arani & Susanne Soretz & Lotfali Agheli, 2023. "Diesel demand elasticities and sustainable development pillars of economy, environment and social (health): comparing two strategies of subsidy removal and energy efficiency," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(3), pages 2285-2315, March.
    16. Muhammad Atta-ul-Islam Abrar & Muhsin Ali & Uzma Bashir & Karim Khan, 2019. "Energy Pricing Policies and Consumers’ Welfare: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(1), pages 1-28, Jan-June.

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