Demand for petrol with explicit new car fuel efficiency effects : a UK study 1977-86.

Rice, Phillip. Frater, Philip.

1988

SEPARATA
57

A full quarterly model for the demand for petrol (motor gasoline) is presented which deals with problems of seasonality in price and volume. It is shown that the annual new car fuel consumption rate can be incorporated in modelling demand for petrol, and this allows a better representation of the structure, and mean speed of response of demand to price effects. By separately specifying a new car fuel parameter the estimated short-run price elasticity is-0.18 after a year. Without such specification the elasticity reduces to-0.14 after three months, (-0.12 after a year) : the difference is discussed and interpreted as compensation due to the new car effect. The new model year car fuel elasticity is defined and found to be about 0.1 in the sense that a 10 percent decrease in 1/100 km (10 percent increase in efficiency) over the previous model year decreases total petrol demand by 1 percent. By endogenizing both petrol price and volume in a simultaneous system it is possible to identify a supply model for petrol volume in terms of the now endogenous petrol price to give a long-run supply elasticity of about 0.4.

Presenta tbls. y gráfs.

REINO UNIDO; GASOLINA; DEMANDA; PRECIOS; CONSERVACION DE COMBUSTIBLES; VEHICULOS; MODELOS; CONSUMO DE COMBUSTIBLES;