A summary overview is provided of the specification and econometric estimation of a state level model of highway gasoline demand. The model was designed for policy and technology sensitive forecasting of motor fuel use by light duty highway vehicles over the period 1980 through 2000. The model is of the stock system type in that it explicitly models the demand for and technological characteristics of the stock of light duty vehicles used in consuming gasoline. The theoretical basis of the model is the household production theory of consumer demand. In this context the aggregate demand for gasoline is viewed as being conditional on the size, composition, and technology of the vehicle fleet. Because of data inadequacies the model does not model commercial and household demand separately. Econometric estimation of the model had to overcome serious multicollinearity problems in the new vehicle class demand equations. Used vehicle supply is modeled by over 200 state/class scrappage equations. Used vehicle prices are forecasted based on exogenous new vehicle prices. In all, the used vehicle model forecasts individual state fleet composition by 6 vehicle classes and 16 vintages. Issues of functional form and regional price and income elasticities were investigated in the estimation of the gasoline demand model. A constant elasticity functional form was accepted with a short run price elasticity of -0.1 and an in use fuel efficiency elasticity of -0.9. (ERA citation 06:011171)
State-Level Stock-System Model of Gasoline Demand
1981
42 pages
Report
No indication
English
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