Elasticities of demand for gasoline in Canada and the United States

Fluctuations in the world price of oil, the concern with greenhouse gas emissions and the efforts to revive the 1997 Kyoto Protocol have resulted in renewed interest in the estimation of elasticities of demand for gasoline. In this paper, a complete system of demand equations is estimated, including an equation for the demand for gasoline. Canadian family expenditure (FAMEX) and United States consumer expenditure (CEX) survey data are used. Household-level data permits estimation of elasticities for various household groups. Also, differences in demand responsiveness to own-price and income changes are estimated for different regions in Canada and the United States. Demand is found to be own-price and income inelastic, on the whole, as reported in earlier studies. There is also variation in these elasticities across regions of Canada and the United States. However, larger differences are observed with respect to household size and housing tenure, than to region of residence. (C) 2003 Elsevier Science B.V. All rights reserved.