Oil, Institutions and Sustainability in MENA by Mohammed Akacem & Dennis Dixon Miller & John Leonard Faulkner

Author:Mohammed Akacem & Dennis Dixon Miller & John Leonard Faulkner
Language: eng
Format: epub
ISBN: 9783030259334
Publisher: Springer International Publishing

Demand

The world demand for oil in 2018 at an average price of $71 per barrel (EIA 2019 Brent) was about 36.5 billion barrels per year (EIA 2019 STEO). For each $10 increase in the price of oil, we estimate that the quantity demanded decreases slightly more than 1 billion barrels per year. We assume a price elasticity of demand36 of −0.2 at a price of $71, which means that a 10% increase in price would result in a 2% reduction in quantity demanded at that price. As the price increases, the price elasticity of demand increases as people are more sensitive to price at higher prices. At about $100 per barrel, the elasticity is −0.31, which is the long-run elasticity for gasoline estimated by a quantitative survey (Havranek et al. 2012). Figure 6.7 depicts the demand for oil assumed in this analysis.

Fig. 6.7World oil demand used in this analysis

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