A survey of oil product demand elasticities for developing countries

As more and more developing countries join the ranks of the rich they will consume both more oil and higher percentage of the lighter products. To satisfy this growing demand oil production and refinery capacity that can provide the right quantity and mix of products must be developed. In a companion piece, Dahl (1993) found the total demand for oil to be price inelastic (-0.34) and income elastic (1.32) These elasticities can give information on the total quantity of oil that might be demanded, the total amount of distillation capacity that might be needed and the overall increases in product prices that might be necessary to choke off demand growth. However, with this overall growth in product demand, the more the shift towards the lighter portion of the barrel, the more complex the refinery and the greater the demand for downstream capital. To provide information on this mix in developing countries in the coming years, this paper surveys the available work on econometric demand elasticities by oil product. (author)