The variability of diesel demand in Cameroon

ABSTRACT

In this study, we use cointegration techniques to investigate the determinants of diesel demand in Cameroon over the period 1994–2014. Our model produces robust and significant estimates of price and income elasticities. We find that short run elasticity is smaller than long run elasticity, showing that consumers are inelastic in the short run whereas elasticities are greater than unity in the long run. This confirms the assertion that diesel demand in the long run is principally determined by the pace of economic activity. Earlier elasticities reports for Cameroon show deviations that are acceptable in relation to the time span taken into account. Our estimates are in accordance with findings in other African countries that share similarities with Cameroon in their economic background and demographics. The results are useful in guiding tax and regulatory policies aimed at stabilizing diesel consumption through price changes.

KEYWORDS:

• Cameroon
• cointegration
• diesel consumption
• elasticities
• error correction model
• income
• price