Understanding crude oil import demand behaviour in Ghana

Abstract

Crude oil importation is a major drain on the economy of Ghana, yet no study has attempted to analyse the determinants of crude oil imports. This paper brings to the fore an understanding of the key drivers of crude oil import demand. Using the autoregressive distributed lag modelling framework (ARDL), we estimate variant short-run and long-run import demand models for crude oil using time series data over the period 1980-2012. The results show that demand for crude oil is price inelastic in both the long and short term. Other important drivers of crude oil import are the real effective exchange rate, domestic crude oil production and population growth. Furthermore, real economic activity is found to be the most robust and dominant driver of crude oil demand with mixed estimates of inelastic and elastic coefficients in the short-run and long-run, respectively. Policy implications of our results are discussed