Transportation Oil Demand Consumer Preferences and Asymmetric Price Responses: Some UK Evidence

David Broadstock, Alan Collins and Lester Hunt

No 126, Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) from Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey

Abstract: The aim of this paper is to (i) establish the role of asymmetric price decompositions in UK road transportation fuel demand, (ii) make explicit the impact of the underlying energy demand trend and (iii) disaggregate the estimation for gasoline and diesel demand as separate commodities. Dynamic UK transport oil demand functions are estimated using the Seemingly Unrelated Structural Time Series Model with decomposed prices to allow for asymmetric price responses. The importance of starting with a flexible modelling approach that incorporates both an underlying demand trend and asymmetric price response function is highlighted. Furthermore, these features can lead to different insights and policy implications than might arise from a model without them. As an example, a zero elasticity for a price-cut is found (for both gasoline and diesel) implying that price reductions do not induce demand for road transportation fuel in the UK. The paper illustrates the importance of joint modelling of gasoline and diesel demand incorporating both asymmetric price responses and stochastic underlying energy demand trends.

Keywords: Diesel; Asymmetry; Price; Underlying Energy Demand Trend (UEDT). (search for similar items in EconPapers)
Pages: 18 pages
Date: 2010-04
New Economics Papers: this item is included in nep-ene
References: Add references at CitEc
Citations:

Published in Journal of Economic Studies, 38(5), 2011, pp. 528–536. (Revised Version with different title)

Downloads: (external link)
https://repec.som.surrey.ac.uk/seeds/SEEDS126.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sur:seedps:126

Access Statistics for this paper

More papers in Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) from Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey Contact information at EDIRC.
Bibliographic data for series maintained by Mona Chitnis ().