An Essay on the Estimate of U.S. Demand for Crude Oil
Liu, Chin-Yen A.
This paper investigates the structure of the global crude oil market and develops a model to examine U.S. demand for crude oil and to estimate the short-term price elasticity of demand for crude oil in the U.S. Historically, fluctuations in the price of crude oil have resulted from events of a political, economic, and/or financial nature. This paper describes five features of the world crude oi1 market that are important in understanding how this market functions: product characteristics, operation and refining, reserves and supply, demand, and price. Finally, this paper uses a modified form of the Nerlove lagged-variable model to predict U.S. demand for crude oil. The dependent variable in this model is U.S. per-capita demand for crude oil. The independent variables in this model include the real price of U.S. crude oil, U.S. per-capita real Gross Domestic Product (GDP), U.S. per-capita demand for crude oil lagged one year, and the U.S. energy-consumption-to-GDP ratio. The exponent of the price term in the model is a measure of short-term price elasticity of demand. Therefore, the model can be used to measure the short-term price elasticity of demand for U.S. crude oil. Additionally, this paper will examine the trend in short-term price elasticity of demand for U.S. crude oil, compare these values to previous estimates, and attempt to explain any deviations about the trend.
petroleum, industry, crude oil, prices
Liu, C. Y. A. (2005). An essay on the estimate of U.S. demand for crude oil (Unpublished thesis). Texas State University-San Marcos, San Marcos, Texas.