Estimation the Price and Income Elasticities of Demand for the Gas and Diesel Fuel in Transportation Sector

Document Type : Original Article

Authors

1 Associate Professor of Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University

2 Ph.D Candidate in Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University

Abstract

About a quarter of different types of energy consumed annually are in the transportation sector in Iran. Gasoline and diesel are the most important source of energy consumed in this sector. This study uses the Generalized Method of Moments (GMM) to evaluate the main factors affecting the gasoline and diesel for the transportation sector in different provinces in Iran during 2006- 2014. The evaluated factors are per capita income, the price of gasoline and diesel, per capita changes in gas and diesel cars stocks, and provincial urban bus fleets. The results show that the per capita gasoline and diesel consumed relative to the price changes in the short runare low elastic. The short-run price elasticity of gasoline is 0.14, the short-run price elasticity of diesel is 0.13; while the elasticity of income for gasoline and diesel is about 0.3 in both main models. An increase in per capita stock of gasoline cars has a positive effect on per capita gasoline and diesel consumption, while the per capita increase in diesel cars stock capacity has a negative impact on the per capita consumption of gasoline and diesel. The results also indicate that the urban bus fleet has not had an impact on fuel consumption per head. Based on the results of this study, the goal of a change in fuel consumption should be on people's per capita income, leading to reduced consumption and behavioral change.

Keywords

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