Abstract
This paper analyzes the city gas demand function in Korea from 1998 to 2018. The demand function of city gas is derived by a Kalman filter method, and price and income elasticities varying with time are estimated. In the case of residential city gas, the price elasticity gradually decreased to a value of approximately 0.57, while income elasticity increased to approximately 1.48 from 1998 to 2018. Alternatively, industrial city gas demand’s price and income elasticities have been estimated as inelastic, as their absolute values were less than unity over time. The absolute values of price and income elasticities are estimated to be larger for residential than industrial city gas, and thus, city gas consumers are more likely to respond to changes in price and income for residential than industrial city gas. There is a substantial income effect on demand for residential city gas in Korea, whereas industrial city gas is found to have relatively small income and price effects. The results of this study provide policy makers with a Kalman filter method to access more accurate information on the city gas demand function’s elasticities, which change with time.
Highlights
IntroductionCity gas is an eco-friendly clean fuel that does not generate atmospheric pollutants—such as SOX (sulfur oxides), NOX (nitrogen oxides), and PM (particulate matters)—in comparison to such fossil fuels as coal and fuel oil
City gas is an eco-friendly clean fuel that does not generate atmospheric pollutants—such as SOX, NOX, and PM—in comparison to such fossil fuels as coal and fuel oil
This study estimated the demand function of Korea’s city gas as derived by a Kalman filter method, and price and income elasticities varying with time in both the cases of residential and industrial city gas
Summary
City gas is an eco-friendly clean fuel that does not generate atmospheric pollutants—such as SOX (sulfur oxides), NOX (nitrogen oxides), and PM (particulate matters)—in comparison to such fossil fuels as coal and fuel oil. City gas primarily supplies homes, commercial buildings, and industrial complexes through pipelines, and is widely used for cooking and heating because of its convenience. City gas in Korea has already become a necessity good for the national economy, similar to electricity, water, and sewage services. Korea’s city gas demand increased by 18,967 million m3 in 2013, and its demand declined by. Korea’s city gas industry is experiencing a period of demand for expansion and supply stability, and its efficiency-based industrial structure is changing. Current low oil prices continue (50–70 $/bbl), and the price competitiveness of city gas has decreased compared to such competitive energy sources as liquefied petroleum gas, kerosene, and electricity
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