Estimating the long-run demand elasticities of crude oil : evidence from GCC members

Abstract EN

Crude oil has a substantial influence on the world's economies because it impacts people's lives.

This study attempts to investigate the crude oil demand response to crude oil prices and income for the Gulf Cooperation Council (GCC) members.

To do so, this study applies different techniques such as a unit root test, an ordinary least squares analysis, and Granger causality tests using time series data from 1970 to 2017 to determine the price and income elasticities of crude oil.

The time series data provides information on the prices and consumption of crude oil, which allowed us to identify trends in the long-run demand for crude oil as a commodity.

We provide evidence regarding the income and price elasticities of demand for GCC members.

The results indicate that the long-run price elasticities for the various GCC members ranged from -1.

19 (UAE) to -0.

19 (Bahrain).

The results also show that the GCC members differ in how crude oil demand responds to income, ranging from 1.

26 (the UAE) to 0.

10 (Bahrain), which is consistent with economic theory.

This research is important because it explicitly considers the impact of price and income changes on oil consumption behaviors, which directly impacts GCC members in the long-run.