Gasoline Demand, Pricing Policy and Social Welfare in Iran

This study estimates a gasoline demand function for Iran using the structural time series model over the period 1968-2002 and uses it to estimate the change in social welfare for 2003 and 2004 of a higher gasoline price policy. It is found that short and long run demand price elasticities are inelastic, although the response is greater in the long run. Hence, social welfare is estimated to fall because of the higher gasoline price (ceteris paribus). However, allowing all variables in the model to change, social welfare is estimated to increase since the changes in the other variables more than compensate for the negative effects of the policy.

US Residential Energy Demand and Energy Efficiency: A Stochastic Demand Frontier Approach

This paper estimates a US ‘frontier’ residential aggregate energy demand function using panel data for 48 ‘states’ over the period 1995 to 2006 using stochastic frontier analysis (SFA). Utilizing an econometric energy demand model, the (in) efficiency of each state is modelled and it is argued that this represents a measure of the inefficient use of residential energy in each state (i.e. ‘waste energy’). This underlying efficiency for the US is therefore observed for each state as well as the relative efficiency across the states. Moreover, the analysis suggests 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 a novel approach to model residential energy demand and efficiency and it is arguably particularly relevant given current US energy policy discussions related to energy efficiency.Energy demand; US residential energy demand; efficiency and frontier analysis; state energy efficiency.

Can the North Sea Still Save Europe?

In the 1980s and 1990s the North Sea emerged as a key non-OPEC oil producing province. Yet today overall production is declining, in both the British and Norwegian sectors and the big oil companies and investors are losing interest in what they now see as a mature province. But apparent maturity is not a bar to new prospects and new possibilities. This paper analyses not merely the still significant potential of the North Sea, but also the wider and increasingly attractive prospects offered by the opening up of the High North, the Barents Sea and part of the Arctic region – all areas of rapidly growing interest which are on Europe’s doorstep. Success will depend heavily on key questions such as the world oil price trend, technological advance and the structure of fiscal regimes for oil and gas extraction. But the opportunities are there and they could be to Europe’s great advantage.North Sea, High North, Fiscal Regime, Oil Price, Mature Oil Province

Transportation Oil Demand Consumer Preferences and Asymmetric Price Responses: Some UK Evidence

The aim of this paper is to (i) establish the role of asymmetric price decompositions in UK road transportation fuel demand, (ii) make explicit the impact of the underlying energy demand trend and (iii) disaggregate the estimation for gasoline and diesel demand as separate commodities. Dynamic UK transport oil demand functions are estimated using the Seemingly Unrelated Structural Time Series Model with decomposed prices to allow for asymmetric price responses. The importance of starting with a flexible modelling approach that incorporates both an underlying demand trend and asymmetric price response function is highlighted. Furthermore, these features can lead to different insights and policy implications than might arise from a model without them. As an example, a zero elasticity for a price-cut is found (for both gasoline and diesel) implying that price reductions do not induce demand for road transportation fuel in the UK. The paper illustrates the importance of joint modelling of gasoline and diesel demand incorporating both asymmetric price responses and stochastic underlying energy demand trends.Diesel; Asymmetry; Price; Underlying Energy Demand Trend (UEDT).

Non-linear technological progress and the substitutability of energy for capital: an application using the translog cost function.

This paper analyses the production process of four industries over four separate time periods using datasets taken form Berndt and Wood (1975, 1979), Hunt (1984a, 1986), Norsworthy and Harper (1981) and Jorgensen and Stiroh (2000). In their initial paper Berndt and Wood failed to explore the alternative options available to them to represent technological progress, a deficiency noted by Hunt (1986) who tested for alternative representations of technology (inter alia) using the Berndt and Wood data. This paper extends this line of reasoning/research by allowing technological progress to take more flexible non-linear forms using both deterministic and stochastic trend models. The results reveal that ‘non-linear trend’ models are generally preferred to ‘linear trend’ or ‘no trend’ models hence raising a question over the validity of assumptions used in much previous empirical research. Further the results reveal that the different assumptions lead to different results for the energy-capital elasticity of substitution.Translog, energy-capital substitution, productivity

Modelling Underlying Energy Demand Trends

Energy Demand Trends

Measuring energy efficiency and its contribution towards meeting CO2 targets: estimates for 29 OECD countries

Using results for 29 OECD countries from the estimation of an extended version of the model advocated by Filippini and Hunt (2011a), actual energy consumption and CO2 emissions are compared to notional energy consumption and CO2 emissions if the countries were energy efficient. This shows the contribution that improvements in energy efficiency can make towards the reduction in CO2 emissions. It is found that in many countries efficiency improvements alone are not likely to be sufficient to bring about reductions in CO2 emissions required to meet ambitious obligations. However, this is not the case across all countries included in the investigation. Moreover, it is shown that some of the world’s largest OECD emitters can make a significant contribution to CO2 reductions from becoming energy efficient. Therefore the negotiations of the new legally binding treaty agreed under the Durban Platform should promote emission reduction targets that incentivise national energy efficiency.emissions, energy efficiency, Durban Platform.

An Empirical Analysis of Energy Demand in Namibia

Using a unique database of end-user local energy data and the recently developed Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration, we estimate the long-run elasticities of the Namibian energy demand function at both aggregated level and by type of energy (electricity, petrol and diesel) for the period 1980 to 2002. Our main results show that energy consumption responds positively to changes in GDP and negatively to changes in energy price and air temperature. The differences in price elasticities across fuels uncovered by this study have significant implications for energy taxation by Namibian policy makers. We do not find any significant cross-price elasticities between different fuel types.Energy demand; ARDL; Cointegration

Frontier Analysis of UK Distribution Networks and the Question of Mergers: A Critique of Ofgem

Since privatization, the 14 UK electricity distribution network operators (DNOs), being natural monopolies, have been subject to RPI-X regulation by the UK regulator (Ofgem). Mergers between the 14 DNOs have formed 7 identifiable ownerships (management teams). It is argued in this research that Ofgem has not used a sufficiently robust approach to benchmarking, and has therefore failed to accurately assess network efficiency gains. Furthermore, Ofgem has used invalid arguments against further mergers. By using more informative panel datasets, as well as a more robust estimation technique (Stochastic Frontier Analysis), this research reveals two crucial facts. Firstly, there is almost no more room for the DNOs in question to become more cost efficient, as the industry is operating close to minimum efficient scale. This suggests that Ofgem needs to widen its scope of benchmarking and regulation (e.g. quality-incorporated benchmarking). Secondly, there seems to be no increasing returns to scale in the industry, a more appropriate reason why further mergers should not take place.Ofgem, Frontier Analysis, Mergers.

Electricity Demand for Sri Lanka: A Time Series Analysis

This study estimates electricity demand functions for Sri Lanka using six econometric techniques. It shows that the preferred specifications differ somewhat and there is a wide range in the long-run price and income elasticities with the estimated long-run income elasticity ranging from 1.0 to 2.0 and the long run price elasticity from 0 to –0.06. There is also a wide range of estimates of the speed with which consumers would adjust to any disequilibrium, although the estimated impact income elasticities tended to be more in agreement ranging from 1.8 to 2.0. Furthermore, the estimated effect of the underlying energy demand trend varies between the different techniques; ranging from being positive to zero to predominantly negative. Despite these differences the forecasts generated from the six models up until 2025 do not differ significantly. Thus on one hand it is encouraging that the Sri Lanka electricity authorities can have some faith in econometrically estimated models used for forecasting. However, by the end of the forecast period in 2025 there is a variation of around 452MW in the base forecast peak demand; which, in relative terms for a small electricity generation system like Sri Lanka’s, represents a considerable difference.Developing Countries, Electricity Demand Estimation, Sri Lanka