Estimating and Forecasting Petroleum Demand in OECD Countries (Gasoline, Jet Fuel and Diesel)

Today, factors such as increasing energy efficiency, use of alternative fuels, and application of  new fuel standards and new environmental laws in OECD countries have led to wide-range of changes in the structure of demand for fossil fuels. Given the importance of light derivatives, namely gasoline, jet fuel and diesel in the demand basked of OECD countries we focus on these products.
We use the least squares dynamic method (DOLS) to estimate the demand function for jet fuel, gasoline and diesel. The results of the estimation indicate a high and meaningful level of income elasticity of demand, while price elasticity is less pronounced, but still significant.  We also notice that incentive and punitive policies, strict rules and environmental constraints and technical advancements have an important impact on the demand for these products. Finally, in order to predict the demand for these three products in the OECD countries for 2025, we first estimate the prices of these fuels, and then use these prices to estimate the demand function of these products.