Abstract
This paper examines the dynamic behavior of ethanol blenders with a focus on the substitution possibilities between ethanol and crude oil in the fuel blending sector. The estimation results of the dynamic linear logit model reveal that the dynamic adjustment in the input demand system is very sluggish. In addition, the estimation results show that an increase in gasoline output no longer raises the share of ethanol after imposing the mandated percentage standard for ethanol. The estimated price elasticities of input demand offer statistical evidence that ethanol demand is less responsive to crude oil prices in the post-ethanol-mandate period than in the pre-ethanol-mandate period. The decompositions of cross-price elasticities strongly support that the reduced elasticities of ethanol demand with respect to the price of crude oil are more attributable to the mandated percentage standard for ethanol rather than the relative price of ethanol to crude oil.
| Original language | English |
|---|---|
| Pages (from-to) | 1587-1607 |
| Number of pages | 21 |
| Journal | Empirical Economics |
| Volume | 52 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 2017 Jun 1 |
| Externally published | Yes |
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Keywords
- Decomposition
- Dynamic adjustment
- Dynamic linear logit model
- Ethanol blender
- Ethanol mandate
ASJC Scopus subject areas
- Statistics and Probability
- Mathematics (miscellaneous)
- Social Sciences (miscellaneous)
- Economics and Econometrics
Cite this
Dynamic adjustment of ethanol demand to crude oil prices : implications for mandated ethanol usage. / Suh, Dong Hee; Moss, Charles B.
In: Empirical Economics, Vol. 52, No. 4, 01.06.2017, p. 1587-1607.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Dynamic adjustment of ethanol demand to crude oil prices
T2 - implications for mandated ethanol usage
AU - Suh, Dong Hee
AU - Moss, Charles B.
PY - 2017/6/1
Y1 - 2017/6/1
N2 - This paper examines the dynamic behavior of ethanol blenders with a focus on the substitution possibilities between ethanol and crude oil in the fuel blending sector. The estimation results of the dynamic linear logit model reveal that the dynamic adjustment in the input demand system is very sluggish. In addition, the estimation results show that an increase in gasoline output no longer raises the share of ethanol after imposing the mandated percentage standard for ethanol. The estimated price elasticities of input demand offer statistical evidence that ethanol demand is less responsive to crude oil prices in the post-ethanol-mandate period than in the pre-ethanol-mandate period. The decompositions of cross-price elasticities strongly support that the reduced elasticities of ethanol demand with respect to the price of crude oil are more attributable to the mandated percentage standard for ethanol rather than the relative price of ethanol to crude oil.
AB - This paper examines the dynamic behavior of ethanol blenders with a focus on the substitution possibilities between ethanol and crude oil in the fuel blending sector. The estimation results of the dynamic linear logit model reveal that the dynamic adjustment in the input demand system is very sluggish. In addition, the estimation results show that an increase in gasoline output no longer raises the share of ethanol after imposing the mandated percentage standard for ethanol. The estimated price elasticities of input demand offer statistical evidence that ethanol demand is less responsive to crude oil prices in the post-ethanol-mandate period than in the pre-ethanol-mandate period. The decompositions of cross-price elasticities strongly support that the reduced elasticities of ethanol demand with respect to the price of crude oil are more attributable to the mandated percentage standard for ethanol rather than the relative price of ethanol to crude oil.
KW - Decomposition
KW - Dynamic adjustment
KW - Dynamic linear logit model
KW - Ethanol blender
KW - Ethanol mandate
UR - http://www.scopus.com/inward/record.url?scp=84976875159&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84976875159&partnerID=8YFLogxK
U2 - 10.1007/s00181-016-1112-6
DO - 10.1007/s00181-016-1112-6
M3 - Article
AN - SCOPUS:84976875159
VL - 52
SP - 1587
EP - 1607
JO - Empirical Economics
JF - Empirical Economics
SN - 0377-7332
IS - 4
ER -