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Unravelling Trends and Seasonality: A Structural Time Series Analysis of Transport Oil Demand in the UK and Japan

Abstract:
This paper demonstrates the importance of adequately modelling the Underlying Energy Demand Trend (UEDT) and seasonality when estimating transportation oil demand for the UK and Japan. The structural time series model is therefore employed to allow for a stochastic underlying trend and stochastic seasonals using quarterly data from the early 1970s, for both UK and Japan. It is found that the stochastic seasonals are preferred to the conventional deterministic dummies and, more importantly, the UEDT is found to be highly non-linear for both countries, with periods where it is both upward and downward sloping.

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

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Q55 - Environmental Economics: Technological Innovation

Keywords: Transport oil demand, underlying trends, Seasonality, Japan, UK, Structural time-series analysis

DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No3-3


Published in Volume24, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.