Modelling Gasoline and Gasoil Consumption and Its Impact on the Environment in Ghana.

Abstract

The study models the consumption of the two most consumed petroleum products in Ghana namely; gasoline and gasoil. Descriptive analyses and the Structural Time Series Model (STSM), is used as the main estimation method because of its ability to account for structural dynamics in the economy, technical efficiency and non-economic factors which may impact the consumption of gasoline and gasoil. The impact of some economic and non-economic factors on the consumption of these products are estimated coupled with the extent to which these factors impact the environment. A counter-intuitive gasoline income elasticity of -0.34 and -0.24 for both the short and long run are obtained due to consumer’s sensitivity to changes in gasoline prices especially, those in the lower income bracket, hence a shift to less expensive fuels. Also, a short and long run gasoil price elasticity of 0.22 and 0.27 respectively are obtained. Using the Structural Time Series Analyzer, (STAMP) carbon emissions, gasoline and gasoil consumption are forecasted for the next 10 years. The forecasts show an increase in carbon emissions, gasoline and gasoil consumption. Among the numerous recommendations include public efficiency education and a removal of gasoil subsidy in other to raise enough revenue to correct the social cost associated with its use and also to discourage its consumption.