How price inelastic is demand for gasoline in fuel-subsidizing economies?

Arzaghi, Mohammad; Squalli, Jay

doi:10.1016/j.eneco.2015.04.009

Cited by 47 publications

(24 citation statements)

References 25 publications

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“…These figures are in line with a more recent study: Arzaghi & Squalli (2015) estimate elasticities for petrol demand in 32 fuel-subsidizing economies. They find short-and long-run price elasticities to be around -0.05 and -0.25 respectively.…”

Section: A Hypothetical Fuel Subsidy Reform: Two Scenariossupporting

confidence: 78%

Incidence and Impact

Rentschler

2015

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Section: A Hypothetical Fuel Subsidy Reform: Two Scenariossupporting

confidence: 78%

Incidence and Impact

Rentschler

2015

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“…As usual in economics, the correct measure of 5. Studies that have focused specifically on countries with fuel subsidies have tended to find smaller long-run price elasticities (Eltony, 1994;Bhattacharyya and Blake, 2009;Arzaghi and Squalli, 2015). For example, using data from 32 fuel-subsidizing countries Arzaghi and Squalli (2015) estimates a long-run price elasticity of demand ranging from -0.25 to -0.45, depending on whether they use a partial adjustment model or cross-country regressions.…”

Section: Key Assumptionsmentioning

confidence: 99%

The Environmental Cost of Global Fuel Subsidies

Davis¹

2017

The Energy Journal

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Despite increasing calls for reform many countries continue to provide subsidies for gasoline and diesel. This paper quantifies the external costs from global fuel subsidies using the latest available data and estimates from the World Bank and International Monetary Fund. Under preferred assumptions about supply and demand elasticities, current subsidies cause $44 billion in external costs annually. This includes $8 billion from carbon dioxide emissions, $7 billion from local pollutants, $12 billion from traffic congestion, and $17 billion from accidents. These external costs are in addition to conventional deadweight loss, estimated to be $26 billion annually. Government incentives for alternative fuel vehicles are unlikely to cost-effectively reduce these externalities as they do little to address traffic congestion or accidents and only indirectly address carbon dioxide and local pollutants.

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“…From a practical perspective, it probably requires real price movements that are flat, declining, or at least fail to keep pace with real income growth. The behavior of price elasticity may also behave differently in fuel-subsidizing economies (Arzaghi and Squalli, 2015), just as the Mexican in the period analyzed in this paper. During January 1997 -December 2007 sample period under consideration, the real prices for both regular and premium grades of gasoline barely exceeded the rate of growth in consumer prices (INEGI, 2009;Crotte et al, 2010).…”

Section: Data and Empirical Resultsmentioning

confidence: 97%