An analysis of oil demand in Turkey

Using quarterly data from 1992-2004, we conduct an econometric investigation of the short and long-run price and income elasticities of gasoline consumption in Turkey. We find that short-run income elasticity is 0.58, short-run price elasticity is -0.15 (statistically insignificant) and the long-run price elasticity is approximately -0.38, long-run income elasticity is approximately -0.23 (statistically insignificant). Our findings suggest that the recent heavy taxation of oil derivatives in general and gasoline in particular may be optimal in Turkey.