The Demand for Oil Products in Developing Countries

Abstract

This paper examines the growth in oil product demand over the 1971-1993 period for 37 developing countries (outside the former Soviet Union and Eastern Europe). These countries represent 90 percent of oil demand for the developing countries, and nearly 70 percent of the world's population. Relationships and changes over time for energy and total oil demand with respect to income and population are examined for each of the countries and presented graphically. The paper then focuses on the eight major petroleum products -liquefied petroleum gases (LPG), naphtha, gasoline, jet fuel, kerosene, diesel (gas oil), heavy fuel oil, and other products- which are similarly examined and presented. Some of the important phenomena affecting oil demand are analyzed. Income and price elasticities are calculated for each of the eight major oil products in all 37 countries. Based on these results, oil demand projections to 2010 are presented. According to the authors, the econometric results and analysis suggest that the medium term future will be like the past. With continued growth in real income in the developing countries, oil demand should grow about as fast as income. This implies a doubling of their oil demand by year 2010, relative to their 1993 levels. The largest growth will continue to be in Asia. However, different oil demand patterns may unfold, given many uncertainties with respect to technology, industrialization, urbanization, penetration of alternative fuels, macroeconomic and financial performance, and government policies.