Determinants of Oil Demand in OECD Countries: An Application of Panel Data Model
Keywords:Oil Demand, Energy, Income Elasticity, Price Elasticity, Panel Data Model
This study aimed to analyze demand for oil in 20 selected OECD countries over the period 1980 to 2011, within the framework of panel data model. The long-run income and price elasticities of oil demand were computed and the Granger causality between variables of interest was tested. The results indicated that oil demand has positive and negative income and price elasticities, respectively. In addition, both income and price were inelastic in the long-run, but price elasticity was lower than income elasticity. Furthermore, a bidirectional causality running from economic growth to oil consumption and vice versa was obtained, providing evidence of feedback hypothesis. Based on these results, some crucial policy implications were suggested.