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

Lester C. Hunt and Yasushi Ninomiya

Year: 2003
Volume: Volume24
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No3-3
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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.



Energy Demand and Energy Efficiency in the OECD Countries: A Stochastic Demand Frontier Approach

Massimo Filippini and Lester C. Hunt

Year: 2011
Volume: Volume 32
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No2-3
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Abstract:
This paper attempts to estimate a panel "frontier" whole economy aggregate energy demand function for 29 countries over the period 1978 to 2006 using parametric stochastic frontier analysis (SFA). Consequently, unlike standard energy demand econometric estimation, the energy efficiency of each country is also modeled and it is argued that this represents a measure of the underlying efficiency for each country over time, as well as the relative efficiency across the 29 OECD countries. This shows that energy intensity is not necessarily a good indicator of energy efficiency, whereas by controlling for a range of economic and other factors, the measure of energy efficiency obtained via this approach is. This is, as far as is known, the first attempt to econometrically model OECD energy demand and efficiency in this way and it is arguably particularly relevant in a world dominated by environmental concerns with the subsequent need to conserve energy and/or use it as efficiently as possible. Moreover, the results show that although for a number of countries the change in energy intensity over time might give a reasonable indication of efficiency improvements; this is not always the case. Therefore, unless this analysis is undertaken, it is not possible to know whether the energy intensity of a country is a good proxy for energy efficiency or not. Hence, it is argued that this analysis should be undertaken to avoid potentially misleading advice to policy makers.



Estimating the Impact of Energy Price Reform on Saudi Arabian Intergenerational Welfare using the MEGIR-SA Model

Frédéric Gonand, Fakhri J. Hasanov, and Lester C. Hunt

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.fgon
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Abstract:
This paper investigates the intergenerational welfare impact of raising administered retail energy prices in Saudi Arabia, an example of an oil-exporting country with a fast growing population. To achieve this, we develop a dynamic model with overlapping generations (called MEGIR-SA), which we believe is the first empirical application of its type to be developed for an oil-exporting country. The model is used to analyze the effects of the increase in some Saudi administered energy prices implemented at the end of December 2015. In particular, the model analyzes how these price increases might affect the welfare of Saudis through a direct increase in energy expenditures, an indirect rise in Saudi public income stemming from a lower domestic demand for oil that fosters oil exports at a given level of domestic oil production, and a direct increase of the turnover of the energy sector. The two latter effects can be redistributed by the Saudi public authorities to private agents through higher current public spending and/or public investment. The analysis suggests that the increase in end-user energy prices results in a net overall favorable effect on the intertemporal welfare of all households. This mirrors the impact on the income of private agents of the surplus in public oil income associated with lower domestic consumption of oil products and recycled to private agents. Moreover, it is shown that the additional oil income associated with the increase in domestic energy prices tends to be relatively more beneficial to future generations if it is recycled through public investment. This is reinforced if the future price of oil remains relatively low. In a possible future situation of declining oil prices and domestic production, a policy that would help meet the Saudi Arabian objectives may consist of gradually increasing the fraction of the additional oil income that is recycled through public capital spending.





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