Fuel Demand Elasticities in Brazil: A Panel Data Analysis with Instrumental Variables

Authors

  • Frederico Uchôa Universidade Federal da Bahia
  • Cleiton Silva de Jesus Universidade Estadual de Feira de Santana
  • Leonardo Chaves Borges Cardoso Universidade Federal de Viçosa

Abstract

The aim of this paper is to provide demand elasticities for the three main fuels used in Brazil: gasoline, ethanol and diesel. We used a panel data approach at municipal level for the period between 2007 and 2016. The innovation in this study is in its introduction of a new instrumental variable for prices, combining three taxes and municipal distance from state capital. The main results are as follows: i) the gasoline, ethanol and diesel demands are price elastic, meaning that all own-price elasticities are greater than one; ii) ethanol consumption is more elastic when the CNG price is added as an explanatory variable, but this does not apply to gasoline; iii) an increase in GDP positively affects the demand for gasoline and diesel (less than proportionally), but does not affect demand for ethanol; iv) fleet size impacts the consumption of all fuels, except when the CNG price is excluded from the ethanol model; v) the ethanol-to-gasoline price ratio is a relevant variable for the demand of both gasoline and ethanol.Keywords: Fuel demand, Causal inference, Panel data analysis, price elasticity, cross price elasticity.JEL Classifications: C13, C26, L11, Q41, Q2.DOI: https://doi.org/10.32479/ijeep.8787

Downloads

Download data is not yet available.

Author Biographies

Frederico Uchôa, Universidade Federal da Bahia

Economics Department

Leonardo Chaves Borges Cardoso, Universidade Federal de Viçosa

Professor in the Rural Economics Department

Downloads

Published

2020-01-21

How to Cite

Uchôa, F., de Jesus, C. S., & Cardoso, L. C. B. (2020). Fuel Demand Elasticities in Brazil: A Panel Data Analysis with Instrumental Variables. International Journal of Energy Economics and Policy, 10(2), 450–457. Retrieved from https://econjournals.com/index.php/ijeep/article/view/8787

Issue

Vol. 10 No. 2 (2020)

Section

Articles

License

Submission of an article implies that the work described has not been published previously , that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.