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Automotive fuel consumption in Brazil: Applying static and dynamic systems of demand equations

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  • Iootty, Mariana
  • Pinto Jr., Helder
  • Ebeling, Francisco

Abstract

This paper aims to investigate and explain the performance of the Brazilian demand for automotive fuels in the period 1970-2005. It estimates the price and income elasticities for all the available fuels in the automotive sector in the country: gasoline, compressed natural gas (CNG), ethanol and diesel. The analysis of the expenditure allocation process among these fuels is carried out through the estimation of a linear approximation of an Almost Ideal Demand System (AIDS) model. Two estimation methods were implemented: the static (through a seemingly unrelated regression) and a dynamic (through a vector error correction model). Specification tests support the use of the latter. The empirical analysis suggests a high substitutability between gasoline and ethanol; being this relation higher than the one observed between gasoline and CNG. The study shows that gasoline, ethanol and diesel are normal goods, and with the exception of ethanol, they are expenditure elastic. CNG was estimated as an inferior good.

Suggested Citation

  • Iootty, Mariana & Pinto Jr., Helder & Ebeling, Francisco, 2009. "Automotive fuel consumption in Brazil: Applying static and dynamic systems of demand equations," Energy Policy, Elsevier, vol. 37(12), pages 5326-5333, December.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:12:p:5326-5333
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    1. 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.
    2. Baek, Ji Won, 2016. "The effects of the Internet and mobile services on urban household expenditures: The case of South Korea," Telecommunications Policy, Elsevier, vol. 40(1), pages 22-38.
    3. 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.
    4. Barla, Philippe & Gilbert-Gonthier, Mathieu & Kuelah, Jean-René Tagne, 2014. "The demand for road diesel in Canada," Energy Economics, Elsevier, vol. 43(C), pages 316-322.
    5. Motallebi, Marzieh & Pendell, Dustin L., 2013. "Estimating an Almost Ideal Demand System Model for Meats in Iran," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150188, Agricultural and Applied Economics Association.
    6. Pessoa, Joao Paulo & Santos, Roberto Amaral & Chimeli, Ariaster, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," SocArXiv 7tvgy, Center for Open Science.
    7. Roberto Amaral-Santos & Ariaster Chimeli & Joao Paulo Pessoa, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," Working Papers, Department of Economics 2023_07, University of São Paulo (FEA-USP).
    8. de Freitas, Luciano Charlita & Kaneko, Shinji, 2011. "Ethanol demand in Brazil: Regional approach," Energy Policy, Elsevier, vol. 39(5), pages 2289-2298, May.
    9. Pouliot, Sebastien, 2013. "Arbitrage between ethanol and gasoline: evidence from motor fuel consumption in Brazil," ISU General Staff Papers 201301010800001007, Iowa State University, Department of Economics.
    10. Ngui, Dianah & Mutua, John & Osiolo, Hellen & Aligula, Eric, 2011. "Household energy demand in Kenya: An application of the linear approximate almost ideal demand system (LA-AIDS)," Energy Policy, Elsevier, vol. 39(11), pages 7084-7094.
    11. José M. Labeaga & Xavier Labandeira & Xiral López-Otero, 2018. "Energy Tax Reform and Poverty Alleviation in Mexico," Working Papers 1801, Universidade de Vigo, Departamento de Economía Aplicada.
    12. Sébastien Pouliot & Kenneth A Liao & Bruce A Babcock, 2018. "Estimating Willingness to Pay for E85 in the United States Using an Intercept Survey of Flex Motorists," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(5), pages 1486-1509.
    13. Archer, Marcelo & Szklo, Alexandre, 2016. "Can increasing gasoline supply in the United States affect ethanol production in Brazil?," Renewable Energy, Elsevier, vol. 95(C), pages 586-596.
    14. Oliveira, Sydnei Marssal de & Ribeiro, Celma de Oliveira & Cicogna, Maria Paula Vieira, 2018. "Uncertainty effects on production mix and on hedging decisions: The case of Brazilian ethanol and sugar," Energy Economics, Elsevier, vol. 70(C), pages 516-524.
    15. Wadud, Zia, 2016. "Diesel demand in the road freight sector in the UK: Estimates for different vehicle types," Applied Energy, Elsevier, vol. 165(C), pages 849-857.

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