Transcript Energy Modeling

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MEASURING LONG-RUN DEMAND
ELASTICITIES FOR PETROLEUM
PRODUCTS IN OPEC
Carol A. Dahl, Professor, Mineral and Energy
Economics Program, Colorado School of Mines,
Golden Colorado, USA and Visiting Professor,
Department of Economics, King Saud University
and
Afaf A. Abaalkhail, Lecturer, Department of
Economics, College of Business Administration, King
Saud University, Riyadh, Saudi Arabia,
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Coming Attractions:
Global Growth in Oil Products compared to OPEC
Only Asia Pacific has grown faster
Compare model types
Talk about scope of project
time periods
products
countries
Issues from initial analysis
Some observations on Saudi Arabia
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Global Growth in Oil Products compared to
OPEC
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Models
Charemza and Deadman (1997)
𝑂𝑡 = 𝛽1 + 𝛽2 𝑃𝑡 + 𝛽3 𝑃𝑡−1 + 𝛽4 𝑌𝑡 + 𝛽5 𝑌𝑡−1 + 𝛽6 𝑂𝑡−1
Where O = the consumption of the oil product
P =the price of the energy product
Y = some measure of economic activity such as GDP
t = an indice for the observation, which is time in a
time series estimate
t – 1 = the variable last period
𝛥𝑂𝑡
= (𝛽6 − 1)(𝑂𝑡−1
𝛽1 − (𝛽2 + 𝛽3 )𝑃𝑡−1 − (𝛽4 + 𝛽5 )𝑌𝑡−1
−
) + 𝛽2 𝛥𝑃𝑡
1 − 𝛽6
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Scope of Project
1980-2009
Gasoline, Kerosene, Diesel, Residual
Total Oil Products
Countries
Algeria, Angola, Ecuador, Indonesia, Iran, Kuwait,
Libya, Nigeria, Qatar, UAE, Venezuela
Today talk about project in context of Saudi Arabia
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Saudi Arabia Battling Russia for the Lead
(Source: BP Statistics)
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Oil's Importance to Saudi Arabia (2009)
(Source: Saudia Arabian Monetary Authority)
>80% of merchandise exports
>80% of government revenues
>15% of gross fixed capital formation
~1/4 Gross Domestic Product (GDP)
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Issues to Consider
Measure of income?
GDP erratic from oil cycles
permanent income
non oil income
Population composition?
women joining labor force
guest workers
What price?
What currency?
local
PPP better than exchange rates
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Which Income?
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Saudi Product Consumption
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Domestic and Guest Workers
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Oil and Product Prices
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Real GDP Per Capita
140.00
(1000 Riyals)
120.00
100.00
80.00
60.00
40.00
20.00
1968
1973
1978
1983
1988
1993
1998
2003
2008
0.00
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Which Price
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Gasoline 1980-2009
1. LnQ/Pop = β1 + β2LnP + β3LnY/Pop
2. LnQ = β1 + β2LnP + β3LnY
1. Dep=ln(G/Pop) Coefficient
t-Statistic
C
-0.657
-0.715
Pg
-0.199
-3.654
Y/Pop
-0.704
-4.043
R2 = 0.39
2. Dep=ln(G)
Coefficient t-Statistic
C
-6.947
-7.678
Pg
0.173
2.690
Y
1.486
9.639
R2 = 0.810
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Gasoline 1981-2009 (LE)
3. LnQ = β1 + β2LnP + β3LnY + β4LnE-1
3. Dep = Ln(G)
Coefficient t Statistic
LR
C
-1.050
-3.051
Pg
-0.045
-2.820
-0.33
Y
0.240
3.507
1.84
G-1
0.887
19.557
R2 = 0.996
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Kerosene 1980-2009
1. LnQ/Pop = β1 + β2LnP + β3LnY/Pop
2. LnQ = β1 + β2LnP + β3LnY
1. Dep=ln(K/Pop) Coefficient t-Statistic
C
1.932
3.510
Pk
-0.001 0.249
Y/Pop
-2.019 0.005
R Square = 0.452
2. Dep=ln(K) Coefficient
C
-12.305
Pk
0.667
Y
2.108
t -Statistic
-5.253
3.234
5.157
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Kerosene LE 1981-2009
~3/4 domestic jet, ~1/4 residential
3. LnK = β1 + β2LnP + β3LnY + β4LnK-1
3. Dep = Ln(K) Coefficient t Statistic
LR
C
-0.586
-0.333
Pk
-0.068
-0.542
-0.56
Y
0.155
0.512
1.27
K-1
0.878
8.543
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Diesel/Gasoil (1980-2009)
~ 50% Electricity and Industry, Transport 50%
1. LnQ/Pop = β1 + β2LnP + β3LnY/Pop
2. LnQ = β1 + β2LnP + β3LnY
1. Dep=ln(D/Pop) Coefficient t-Statistic
C
-0.719
-2.459
Pd
-0.151
-3.951
Y/Pop
-0.423
-3.083
R Square
= 0.605
2. Dep=ln(D) Coefficient
t -Statistic
C
4.785
-5.31
Pd
0.126
2.183
Y
1.185
7.617
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Diesel/Gasoil (1981-2009)
3. LnQ = β1 + β2LnP + β3LnY + β4LnE-1
3. Dep = Ln(D)
Coefficient t Statistic
LR
C
-1.323
-3.462
Pd
-0.038
-1.951
-0.176
Y
0.327
3.908
1.498
D-1
0.782
12.505
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Residual (Heavy) Fuel Oil (1981-2006)
1. LnQ/Pop = β1 + β2LnP + β3LnY/Pop
2. LnQ = β1 + β2LnP + β3LnY
1. Dep=ln(R/Pop) Coefficient t-Statistic
C
-8.361
-1.954
Pr
-0.178
-0.546
Y/Pop
1.076
1.333
R-squared
0.326
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Heavy Fuel Oil (1981-2006)
3. LnR = β1 + β2LnP + β3LnY + β4LnR-1
3. Dep = Ln(R)
Coefficient t Statistic
LR
C
-0.788
-0.707
Pr
-0.126
-1.399
-1.07
Y
0.210
1.166
1.78
R-1
0.882
8.908
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Sum Up
Preliminary Work Suggest Some Interesting Issues
At least in Gulf
Oil GDP is erratic
Composition of population should be investigated
Which price
may not matter at very low prices