1. Pooled Time Series Cross-Section Estimation of Demand for Gasoline and Diesel in G7 Countries
2009 International Energy Workshop
17-19 June Venice Italy
Mehdi Asali (Ph.D.)
Petroleum Studies Department
OPEC

2. Outline Introduction Modeling Approach Disaggregation of data
Structure of the Models and Estimation Results
Concluding Remarks

3. Introduction: Crude and Products Prices

4. Introduction: Per Car Gasoline Consumption

5. Introduction: Real Consumer Prices of Gasoline

6. Introduction: Real Per Capita GDP

7. Modeling Approach: VAR, ARDL and Pooled Time Series Cross-Section
VAR and ARDL models are used for individual country estimates. Pooled time series cross-section models are estimated for all G7 countries data combined
Pooled time series cross-section is a method of studying a particular subject (e.g. demand for products) within multiple sites (e.g. countries) periodically observed over a time frame
The combination of time series with cross-section can enhance quality and quantity of estimations

8. Structural of the VAR Model

9. General Structural of the Pooled Model (ARDL)

10. Individual Country Specific and Polled Estimation
Two VAR and ARDL type econometric models are estimated for each G7 country individually and a pooled time series cross-section model is estimated for all countries as a whole
Here we have used about (80*7*6) 3360 observations for our panel estimations and compared the findings with that of individual countries’ estimation results

11. Disaggregation of Data
Different frequency of time series: annual car ownership, quarterly demand for gasoline
Lack of time series with high frequency for developing countries (China, India,..)
Temporal disaggregation of data in applied econometrics: Mathematical, Statistical and State Space Aproach
Handbooks by IMF and EC Eurostat, ECOTRIM

12. State Space Algorithm of Temporal Disaggregation . Process

13. State Space Approach

14. Statistical Approach, Fernandez and Litterman

15. Statistical Approach, Fernandez and Litterman

16. De-seasonalisation of the Quarterly Time Series

17. De-seasonalisation of the Quarterly Time Series

18. Estimation Results
Individual Country Estimates (Unrestricted VAR Models and Auto-Regressive Distributed Lag ARDL Models)
Pooled Time Series Cross-Section Estimates

19. Individual Country Estimates
VAR and ARDL(1,1,1,1,1,1) models are estimated for each one of the G7 countries
The main results include (estimates of) the short and long-run price and income elasticities of demand for gasoline and diesel and speed of adjustment in economies of concerned
This allows comparison of elasticities of demand for gasoline and diesel in these countries and G7 as a whole

20. Individual Country Estimates: Canada

21. Individual Country Estimates: France

22. Individual Country Estimates: Germany

23. Individual Country Estimates: Italy

24. Individual Country Estimates: Japan

25. Individual Country Estimates: UK

26. Individual Country Estimates: USA

27. Price and Income Elasticities of (Per- Car) Demand for Gasoline (G7)
Per GDP Elasticity (εy)
Price Elasticity (εP)
Speed of Adjustment
Short-run
Long-run
Canada
0.12
0.387
-0.02
-0.06
0.32
France
-0.14
-0.95
-0.03
-0.29
0.15
Germany
-0.21
-2.8
-0.45
0.08
Italy
-0.19
-1.9 -
0.10
Japan
-0.11
-0.50
0.22 UK
-0.10
-0.013
-0.26
0.05
USA
0.11
0.73
-0.20

28. Pooled Model Estimation Results

29. Pooled Model Estimation Results

30. Pooled Model Estimation Results
Variable
Coefficient
t-statistic
Short-run Effect
Long-run Effect
Per Capita GDP
-0.024
-0.20
(-1.1*)
Gasoline Prices
-0.019
-0.16
(-5.63)
coefficient
Lagged Demand for Gasoline
0.87
(50.23)
Demand for Diesel (G7)
0.10
(4.5)
Lagged Demand for Diesel (Ca)
-0.11
(-5.34)
Lagged Demand for Diesel (Fr)
-0.12
(-6.54)
Lagged Demand for Diesel (Ge)
-0.13
(-6.45)
Lagged Demand for Diesel (It)
-0.14
(-6.80)
Lagged Demand for Diesel (Ja)
(-6.24)
Lagged Demand for Diesel (UK)
(-5.42)
Lagged Demand for Diesel (US)
-0.08
(-4.04)

31. Estimating a Partial Adjustment Model of Demand for Oil in G7 Countries

32. Summary of Estimation Results for Demand for Oil in G7 Countries
Price Elasticity
GDP Elasticity
Short-run
Long-run
Canada
0.05
0.14
0.54
France
-0.02
-0.07
0.52
Germany
-0.04
-0.17
Italy
-0.05
-0.20 UK
-0.15 US
-0.01
-0.03
0.59
Range
-0.01 to -0.06
-0.03 to -0.21
0.52 to 0.59

33. Quarterly Changes of GDP Elasticity of Demand for Oil in G7 Countries

34. Summary and Concluding Remarks 1 of 2
In this report (per car) demand for gasoline and diesel in G7 countries for the period of is investigated using VAR, ARDL and Pooled Time Series Cross0Section methods
Models are of quarterly frequency and we had to disaggregate some of the time series that were only available annually (car ownership) to arrive at quarterly data

35. Summary and Concluding Remarks 2 of 2
Statistically significant negative relations between (per car) demand for gasoline and increases in per capita income in 5 out of 7 countries under study
Only for USA and Canada a positive relation between per capita income growth was found
Gasoline prices, and particularly its ratio to prices of diesel appear to exert significant negative impact on demand for gasoline
An increase in demand for diesel reduces demand for gasoline with one period lag and not at the same period

36. Thank you