Carol Dahl

Analysing gasoline demand elasticities: a survey

This paper is a survey of studies on gasoline demand. Although there are very many dxerent studies in this

Consumer adjustment to a gasoline tax

eld which sometimes appear to arrive at contradictory results, we find that with proper stratification of studies by model and data type much of the contict turns to consensus. In this survey we classtfy studies by data type and by ten d@erent categories of model and with the exception of estimates on seasonal data, which tend to be unstable, and of certain inappropriate model formulations, we find a fair degree of agreement concerning average short-run and even long-run income and price elasticities.

Do Gasoline Demand Elasticities Vary

A study of how customers will respond to a tax based on miles per gallon indicates that the long-term effect on gasoline consumption could reduce crude oil imports by 27 percent. When demand elasticity of gasoline is broken down into the price elasticity of demand minus the price elasticity of demand for fuel mileage, it is learned that the short-term miles per gallon factor is larger than previously thought. Adjustments in the stock of automobiles to those providing better gas mileage is indicated by a 20 percent increase in miles per gallon with an additional 40 percent gasoline tax. 20 references.

The Brazilian electrical system reform

This paper answers questions concerning gasoline-demand elasticity by analyzing periods that span both increasing and decreasing prices, focusing on consumer decisions about the distance driven and the automobile size. US data show that efficiency changes and reduced mileages account equally for short-run elasticities, while automobile efficiency accounts for 90% in the long run. The analysis shows a consistency that makes it useful in projecting elasticities during market disruptions and over a broad span of economic conditions in other countries. 38 references. (DCK)

Modelling transport fuel demand

Abstract Although the Brazilian electrical system has been a public monopoly, the threat of electricity shortages from a lack of investment triggered a comprehensive reform. In 1993 the government began a series of laws, decrees and regulations reforming the tariff policy, allowing privatization of utilities, foreign investments and independent power produces, and creating an independent transmission grid and a new electricity regulatory agency (ANEEL). The new regulatory framework is not completely defined but the proposed model intends to transform bulk electricity supply into a competitive market similar to that adopted in England. Our objective is to evaluate whether the proposed reform will succeed in attracting the required private capital, will allow an unregulated wholesale electricity market and will require a strict regulatory framework. The reform has been quite successful in privatizing the distribution companies but is allowing monopolistic rents, and has failed until now to attract private investments to expand generation capacity. The risk of black-outs has increased, and the proposed wholesale electricity market may not be appropriate because of barriers to constructing new hydroelectric units, now 90% of the system. Therefore, a new regulatory framework and a strong regulatory agency with a well-defined tariff policy should have proceeded the privatization.

Survey of price elasticities from economic exploration models of US oil and gas supply

Transport fuels account for an increasing share of oil consumption, and savings appear to be both technically and socially harder to achieve than in many other sectors where substitutes are more easily available. Large sums of money are invested in trying to improve efficiency of vehicles but the really most relevant issue is that of whole transport systems. These systems cannot be planned in detail, however, but are the result of many individual actions. It is therefore of particular interest to study the economics of the transport fuel market and thereby to evaluate the efficiency of the price mechanism as an instrument of policy in this area. Taxes and hence domestic prices of transport fuels vary considerably between countries (Sterner, 1989a, Sterner, 1989b; Angelier and Sterner, 1990) and thus high demand elasticities would imply considerable differences in consumption patterns.

U.S. energy product supply elasticities: A survey and application to the U.S. oil market

Abstract Exploration for oil or gas reserves consists of searching for and finding new reserves. It begins with the study of the geology of an area followed by exploratory or wildcat drilling in promising areas. How much oil or gas is found or the supply of new reserves is a function of exploration, the geology of the area drilled along with a random component measuring the fickleness of mother nature in yielding up her treasures to mere mortals. Knowing how oil and gas prices affect this process (price elasticities) is valuable to those who are involved with this strategic industry. Economic theory suggests that the search for petroleum is affected by prices and can be characterized by functions representing geophysical activities and drilling while the finding of reserves can be characterized by some sort of discovery process. The earliest econometric approach to modeling oil and gas exploration, which yielded price elasticities, was to estimate the search process using a function for wildcat wells drilled (Ww). For example, the discovery process for oil was represented using two equations: a success rate equation % of wells that are commercially successful (W/Ww) and an average oil reserve per successful well equation (O/W). Each of these three dependent variables were dependent on price and other relevant variables. The product of these three variables (Ww ∗ W/Ww ∗ O/W) yields the supply of oil reserves (O). In this paper we survey all U.S. exploration models for oil and gas that include wells drilled, share of successful wells, average reserves per well, or total reserve equations. We focus our survey on price elasticities to capture the effect of market price on the exploration process. Drilling equation results tend to be good with drilling strongly influenced by oil price and we suspect the long run drilling oil price elasticity to be greated than 1. It is much less clear how natural gas prices have affected drilling but their effect seems to be increasing. The most important issue in drilling equations besides including the correct economic variables is more work to clarify what geological variables provide the best forecasts. The econometric estimates for successful wells and average reserves per wells are much poorer and we would recommend more systematic work on discovery models to determine which perform the best.

Interfuel substitution in US electricity generation

Abstract We survey studies of simple energy supply models to find the most promising technique for developing supply elasticities in the U.S. crude oil market. The two dozen studies located include direct estimates of energy supply elasticities or cost studies from which supply or reserve elasticities can be inferred. We include all available studies for all forms of energy both primary and secondary. We find direct estimates of oil supply to obtain weak results unless depletion and price expectations are included. Oil product supply elasticities vary widely across studies but appear to be elastic. Studies that estimate reserve price elasticities by computing reserve costs appear to be the most promising for estimating reserve elasticities for fossil fuel supply. Hence we apply this technique to US oil reserves and find a reserve elasticity of 1.27.

Estimating Oil Product Demand in Indonesia using a Cointegrating Error Correction Model

Ongoing changes in the US electricity market include restructuring and increased competition. With this unfettering of the market, the fuel choice in generation is expected to become more flexible and responsive. To investigate this hypothesis, studies of US electricity fuel choices over the last three decades are summarized and the most recent analysis is provided on a market very different from the one on which earlier studies were done. Modern data handling techniques allow the consideration of the most comprehensive database including 185 utilities on monthly data for 1993. This paper finds fuel choice to show a considerable amount of price responsiveness, the amount of responsiveness is sensitive to the fuel substitution possibilities within the utility, and the amount of responsiveness seems to have increased recently for oil and natural gas.

The effect of deregulation on US fossil fuel substitution in the generation of electricity

Indonesias long oil production history and large population mean that Indonesian oil reserves, per capita, are the lowest in OPEC and that, eventually, Indonesia will become a net oil importer. Policy-makers want to forestall this day, since oil revenue comprised around a quarter of both the government budget and foreign exchange revenues for the fiscal years 1997/98. To help policy-makers determine how economic growth and oil-pricing policy affect the consumption of oil products, we estimate the demand for six oil products and total petroleum consumption, using an error correction-cointegration approach, and compare it with estimates on a lagged endogenous model using data for 1970–95.