The price and income elasticities of natural gas demand: International evidence

- We estimate the long-run price and income elasticities of natural gas demand.
- Our data set covers 44 countries over the period 1978-2011.
- We use per capita natural gas reserves to instrument the natural gas price.
- Our long-run price elasticity of natural gas demand point estimates are around −1.25.
- Our long-run income elasticity of natural gas demand estimates are +1 and above.

Natural gas contributes a growing share of the world's energy mix. In this paper we use national-level data for a sample of 44 countries to estimate the price and income elasticities of natural gas demand. We present both single-equation results and results instrumenting natural gas prices with proved natural gas reserves. Our instrument includes both domestic reserves and distance-weighted reserves in other countries. We obtain estimates of the average long-run price elasticity of natural gas demand of around −1.25 and of the average long-run income elasticity of natural gas demand of +1 and higher. We also present separate estimates for final natural gas demand by industry and households.