EMF OP 36 OECD Oil Demand: Estimated Response Surfaces for Nine World Oil Policy Models

Econometric response surfaces for nine different world oil policy models are estimated for aggregate oil demand within the developed countries of the Organization of Economic Cooperation and Development (OECD). The estimates are based upon scenario results reported in a recent model-comparison study. The response surface approach provides a parsimonious summary of model responses. It enables one to estimate long-run price elasticities directly rather than to infer such responses from 20-year cross-scenario results. It also shows more directly the significant effect of initial demand conditions (in 1988) on future oil demand growth. Due to the dynamic nature of the oil demand response, past prices exert a strongly positive effect on future oil demand in some models, but little or even negative effect in other models. On the basis of this finding, we urge demand modelers to be much more explicit about what their systems reveal about the extent of disequilibrium embedded in their model's starting oil demand conditions.