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Oil and Petroleum Product Armington Elasticities: A New-Geography-of-Trade Approach to Estimation

Author

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  • Edward J. Balistreri
  • Ayed Al-Qahtani
  • Carol A. Dahl

Abstract

Exploiting the structural developments suggested by the geography-of-trade literature, we estimate the elasticity of substitution across regional varieties for six crude grades and seven refined products using fixed-effects gravity regressions. We use unique data, compiled by Al-Qahtani (2008), that include global coverage of bilateral trade and transport costs for the crude grades and refined products. We find that the point estimates of elasticities of substitution across import varieties exceed those commonly reported in the literature and those adopted in simulation analysis. Our estimates indicate that there may be far less hysteresis in the pattern of petroleum trade than previously forecast.

Suggested Citation

  • Edward J. Balistreri & Ayed Al-Qahtani & Carol A. Dahl, 2010. "Oil and Petroleum Product Armington Elasticities: A New-Geography-of-Trade Approach to Estimation," The Energy Journal, , vol. 31(2), pages 167-180, April.
    • Handle: RePEc:sae:enejou:v:31:y:2010:i:2:p:167-180
    DOI: 10.1177/01956574201031021
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    References listed on IDEAS

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    Cited by:

    1. Peter Öhlinger & Michael Irlacher & Jochen Güntner, 2024. "Not all oil types are alike in trade substitution," Nature Communications, Nature, vol. 15(1), pages 1-12, December.

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