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OECD Oil Demand Dynamics: Trends and Asymmetries

Oil market data of the 1980s reject a simple, symmetric reduced-form model of dynamic oil demand in the OECD countries. Tests of price asymmetric long-run demand models produce ambiguous results. The pooled time series estimations find near unitary output elasticities, and reject linear demand models in favor of constant elasticity formulations. Despite large differences in product prices and crude prices, the data cannot reject use of a crude price model fir aggregate oil demand. A reduced-form model symmetric in product prices but with technology trends for non-price oil conservation compares favorably with other formulations, and provides slightly lower projections of future oil demand intensity. However, even these lower econometric projections imply substantial increases in aggregate oil demand, increases which exceed those found in the conventional judgmental estimates.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

Keywords: Oil demand, OECD, Asymmetry, Constant elasticity model, Oil prices

DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No1-6

Published in Volume 14, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.