Dissecting fuel demand elasticities in Ghana: A quantile regression analysis using the Marshallian demand framework

Area of Science:

• Energy Economics
• Consumer Behavior Analysis
• Econometrics

Background:

• Fuel demand elasticity is crucial for economic stability and policy.
• Understanding consumer responses to price and income changes is vital for Ghana's energy sector.
• Traditional models often overlook the complex, nonlinear nature of fuel demand.

Purpose of the Study:

• To investigate fuel demand elasticities in Ghana using the Marshallian demand framework.
• To analyze consumer responses to income and price changes in petrol demand.
• To capture nonlinear and frequency-dependent relationships in fuel consumption patterns.

Main Methods:

• Ensemble Empirical Mode Decomposition (EEMD) for signal processing.
• Quantile Regression Analysis (QRA) for income-specific elasticities.
• Quantile-on-Quantile Regression (QQR) for time-varying and distributional effects.

Main Results:

• Petrol is a normal good in the medium term but inferior for high-income consumers long-term.
• Petrol and diesel exhibit both complementary and substitutive behaviors.
• Significant heterogeneity exists in consumer responses to fuel prices and income.

Conclusions:

• Traditional assumptions of price inelasticity and uniform demand are challenged.
• Policy recommendations include differentiated fuel pricing and targeted subsidies.
• Investment in alternative energy and fuel-saving technologies is encouraged for Ghana.