A Single-Equation Study of U. S. Petroleum Consumption: The Role of Model Specification

Elasticity of demand for relative petroleum inventory in the short run

“…¢See for example, Arize [2000], Jones [1993], and Main [1981]. sit was not possible to calculate the elasticity for every OECD country due to data problems for several member countries.…”

U.S. petroleum consumption behavior and oil price uncertainty: Tests of cointegration and parameter instability

“…Drawing upon the empirical literature in this area (for example, Jones [1993]), a cointegration model may be written as:…”

“…Jones [1996] reports strong empirical support for a long-run equilibrium relationship among oil consumption, real price of oil, and real gross national product. Other studies, such as Bentzen and Engsted [1996], using annual data (1947 to 1989) from the Appendix in Jones [1993], argued that when procedures (that is, Engle and Granger [1987] and Johansen and Juselius [1990]) missing in the analysis carried out by Jones [1993] are employed, no evidence is obtained of a long-run equilibrium relationship among the variables. Against this background, Bentzen and Engsted [1996, p. 785] concluded that, "...there is one or more important nonstationary variables missing in explaining petroleum demand in the long-run.…”

“…Therefore, recent tests for parameter instability in cointegrated systems are applied to examine this issue. Note that a common feature of previous studies (for example, Jones [1993Jones [ , 1996 and Bentzen and Engsted [1996]) investigating long-run elasticities in U.S. petroleum consumption has been to rely heavily on the assumptions of time series with no structural changes and of long-run relationships that are temporally stable. It is possible that this may not be the case because economic data often come from processes with time-dependent parameters.…”

“…Second, it is treated as an endogenous variable. In addition, to buttress these findings and assess their robustness, this paper presents the results from analyzing Jones' [1993] data. In doing so, it is shown that the inclusion of oil price uncertainty is neccessary for cointegration to be achieved using his data.…”