1998 Short Run Demand for Selected Petroleum Products
Author: Vivian A. Cabiling
While petroleum products are essential commodities particularly in the transportation, manufacturing, and aviation sectors, there is little research on what drives the local demand for oil. Moreover, the effect of government excise taxes on petroleum needs to be measured in order to formulate adequate tax policies that will guarantee revenue for the government with minimal adverse effect on demand. The study primarily aimed to address these research gaps by identifying the market determinants of demand for certain petroleum products and ultimately determine the effect of excise taxes on these products. Short run demand models were constructed for the following oil products: diesel, regular and premium gasoline, aviation turbo, and kerosene. Using multiple linear regression and regression with autocorrelated errors, market drivers of demand for each of the petroleum products were determined. Pump prices of petroleum, government excise taxes and some macroeconomic indicators were found to explain the variation in demand for the selected oil commodities. With this, the study concluded that appropriate tax policies can efficiently regulate petroleum consumption.