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Christos, Tsirimokos, 2011. Price and income elasticities of crude oil demand : the case of ten IEA countries. Second cycle, A2E. Uppsala: SLU, Dept. of Economics

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Abstract

This master thesis attempts to estimate the short-run and long-run price and income elasticities of crude oil demand in ten IEA member-countries for the time period 1980-2009. Specifically, the price and income elasticities for Sweden, Denmark, Spain, Portugal, Turkey, Finland, Italy, Germany, USA, and Japan are estimated. Crude oil consumption is a function of four explanatory variables: real oil prices, real GDP per capita, oil consumption lagged one year and a time trend representing technological improvements. The econometric model that is used is a multiple regression model derived from an adaption of Nerlove’s partial adjustment model. Empirical results reveal that elasticities (both price and income) are lower in the short-run and hence more inelastic, indicating that countries need time to respond to changes in price or income. Econometric estimations illustrate that oil consumption is highly price inelastic both in short-run and long-run. Income elasticities are more elastic than price elasticities and close to unity in the long-run, indicating that countries are more sensitive to income changes.

Main title:Price and income elasticities of crude oil demand
Subtitle:the case of ten IEA countries
Authors:Christos, Tsirimokos
Supervisor:Rob , Hart
Examiner:Yves, Surry
Series:Examensarbete/SLU, Institutionen för ekonomi
Volume/Sequential designation:705
Year of Publication:2011
Level and depth descriptor:Second cycle, A2E
Student's programme affiliation:NM005 Environmental Economics and Management - Master's Programme 120 HEC
Department:(NL, NJ) > Dept. of Economics
Keywords:crude oil demand, oil prices, price elasticity, income elasticity, Nerlove's partial adjustment model
URN:NBN:urn:nbn:se:slu:epsilon-s-769
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-s-769
Subjects:Economics and management
Language:English
Deposited On:18 Nov 2011 15:16
Metadata Last Modified:20 Apr 2012 14:23

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