Elasticity of demand for relative petroleum inventory in the short run

Michael Ye, John Zyren and Joanne Shore

Atlantic Economic Journal, 2003, vol. 31, issue 1, 87-102

Abstract: To better understand petroleum markets, the authors established the importance of the deviation of inventory levels away from a normal level, where the normal level is comprised of seasonal movement and a general trend. Since supply and demand for petroleum are less elastic to price in the short run than is inventory, it is this deviation or relative inventory level that plays the role of absorbing unexpected shifts in demand and supply. They demonstrated theoretically that the demand for relative inventory must be negatively related to price. They estimated the relative inventory levels and associated short-run price elasticity for several OECD countries and groups of countries, and found that short-run price elasticity of demand for relative inventory is negative and statistically significant, supporting the theoretical arguments. Copyright International Atlantic Economic Society 2003

Date: 2003
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DOI: 10.1007/BF02298465

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