Road transport energy demand in West Africa: a test of the consumer-tolerable price hypothesis

Abstract

This study estimates road transport energy demand (both aggregate energy fuel and gasoline energy fuel) in West Africa using the Pooled Mean Group Estimate and the Panel FMOLS. Primarily, we test for the nonlinearity in the price effects (hereafter referred to as the consumer-tolerable price hypothesis), which is motivated by Adom (2017. “The long-run Price Sensitivity Dynamics of Industrial and Residential Electricity Demand: The Impact of Deregulating Electricity Prices” Energy Economics 62: 43–60). First, for the baseline model, we find that, in the long-run, the energy conservation potency of pricing tools is restrained due to the presence of a rebound effect. Similar result is obtained in the short-run with evidence of cross-sectional differences. Second, in the long-run, we find that the demand–price relation is an inverted U-shaped, but we could only confirm this for Nigeria and Ghana; this suggests that, in the long-run, price disincentive tools have to be higher than a required price threshold in order to induce energy conservation behaviours in these economies.

Keywords

• road transport energy demand
• west africa
• pooled mean group estimate
• gasoline demand