Price and income elasticities of oil demand in Mauritius: An empirical analysis using cointegration method

Journal article

Pravesh Raghoo, Dinesh Surroop
Energy Policy, vol. 140(111400), 2020

DOI: 10.1016/j.enpol.2020.111400

DOI

Cite

APA Click to copy
Raghoo, P., & Surroop, D. (2020). Price and income elasticities of oil demand in Mauritius: An empirical analysis using cointegration method. Energy Policy, 140(111400). https://doi.org/10.1016/j.enpol.2020.111400

Chicago/Turabian Click to copy
Raghoo, Pravesh, and Dinesh Surroop. “Price and Income Elasticities of Oil Demand in Mauritius: An Empirical Analysis Using Cointegration Method.” Energy Policy 140, no. 111400 (2020).

MLA Click to copy
Raghoo, Pravesh, and Dinesh Surroop. “Price and Income Elasticities of Oil Demand in Mauritius: An Empirical Analysis Using Cointegration Method.” Energy Policy, vol. 140, no. 111400, 2020, doi:10.1016/j.enpol.2020.111400.

BibTeX Click to copy

@article{pravesh2020a,
  title = {Price and income elasticities of oil demand in Mauritius: An empirical analysis using cointegration method},
  year = {2020},
  issue = {111400},
  journal = {Energy Policy},
  volume = {140},
  doi = {10.1016/j.enpol.2020.111400},
  author = {Raghoo, Pravesh and Surroop, Dinesh}
}

Abstract

There are no studies that quantify the effects of price and income on the demand of fuel oil, gasoline and diesel oil in Mauritius. In line with increasing retail prices for these commodities, there is no estimation of the effect that increasing price, income and other variables like electricity and vehicle stock have on demand of petroleum products which affects effective policymaking in this area. This study uses an ARDL–ECM model to determine consumer response on petroleum demand when price and income in Mauritius changes. The study determines the income and price elasticities of demand which is a needed parameter in transportation and taxation policies. It was found that gasoline is price and income inelastic in the short–run, diesel oil is income inelastic in the long–run and fuel oil is inelastic in the short–run but becomes elastic in the long–run, other variables being not significant. The effect of rising electricity consumption on fuel oil demand was to a ratio of 1: 1.1 on average. Vehicle stock is estimated to cause unprecedented increase in gasoline demand by nearly 3.1% on average. Results are essential for transportation and energy taxation policymaking.