| dc.description.abstract | This study focuses on the analysis of the demand
for gasoline and light diesel in Kenya. The main objective
was to estimate demand functions of the two fuels. The
specific objectives were: to identify the main factors
influencing their demand; and to find their corresponding
elasticities.
A log linear econometric model incorporating a
geometric distributed lag was estimated using Kenya's time
series data from 1964 to 1985.
The regression results show that in both cases, the
positive income effect dominates the negative price effect.
This in form suggests that policies that focus exclusively
on prices would not be helpful in restraining growth in
demand for these fuels. Additional measures should then
be used along with the pricing policy if growth in demand
for both the fuels is to be restrained. It was also found that in both cases, the demand
adjusts to changes in exogenous factors with a lag. However,
the impact of the oil crisis on gasoline consumption turned
out to be statistically insignificant. This tends to
reinforce the low price elasticity which was obtained.
The results further show the existence of substitution
between light diesel and gasoline. This suggests that the
pricing policy should be such that it does not allow
the price differentials of these two fuels to be very
large, otherwise excess demand for the cheaper fuel
can ensue | en |
