Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach

Ibrahim Abada (), Vincent Briat and Olivier Massol
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Ibrahim Abada: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: Most of the recent numerical market equilibrium models of natural gas markets use imperfect competition assumptions. These models are typically embedded with an oversimplified representation of the demand side, usually a single-variable affine function, that does not capture any dynamic adjustment to past prices. To remedy this, we report an effort to construct an enhanced functional specification using the system dynamics-based model of Moxnes (1987, 1990). Thanks to a vintage representation of capital stock, this putty-clay model captures the effect of both past and current energy prices on fuel consumption. Using a re-calibrated version of this model, we first confirm the pertinence of this modeling framework to represent interfuel substitutions at different fuel prices in the industrial sector. Building on these findings, a dynamic functional specification of the demand function for natural gas is then proposed and calibrated.

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Date: 2011
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Related works:
Journal Article: Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach (2013)
Working Paper: Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach (2011)
Working Paper: Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach (2011)
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