Domestic demand for petroleum products in MENA countries

Abstract

The purpose of this paper is to analyse the domestic demand for petroleum products in the Middle East and North African (MENA) countries employing a recent data series (1982–2005). Understanding the domestic demand of oil producing countries is important due to the existence of subsidised supply, loss of foreign exchange income and the environmental effects of oil use. The paper analyses the evolution of petroleum product demand in MENA and presents an econometric analysis of demand using a simple log-linear specification for four petroleum products, namely gasoline, diesel, kerosene and fuel oil. The study covers seven MENA countries, namely Algeria, Iran, Kuwait, Libya, Saudi Arabia, UAE and Qatar. The results show that demand has grown quite fast in these countries probably because the fuel price has been kept very low while income has risen fast and thus demand has grown fast. The gasoline demand model has performed better than other models in terms of producing expected signs for the parameters. The results for the kerosene model was the least satisfactory as most of the coefficients were found to be statistically insignificant. However, in terms of numerical results, this study compares well with other similar studies of the past.