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

Abstract

Our study investigates fuel demand elasticities in Ghana by assessing consumer responses to income and price changes using the Marshallian demand framework. Applying Ensemble Empirical Mode Decomposition (EEMD), Quantile Regression Analysis (QRA), and Quantile-on-Quantile Regression (QQR), our study captures nonlinear, frequency-dependent relationships in petrol demand. Our study employed a monthly frequency data from 2000–2022. Our results reveal that petrol acts as a normal good in the medium term, but becomes inferior for high-income consumers in the long term. Petrol and diesel demonstrate both complementary and substitutive behaviours across different time horizons and income levels. The findings challenge traditional assumptions of price inelasticity and uniform demand, highlighting heterogeneity in consumer responses. We recommend differentiated fuel pricing policies and targeted subsidies to protect vulnerable groups. We also encourage investment in alternative energy sources and fuel-saving technologies. These insights are particularly valuable for policymakers, energy regulators, and development economists seeking to enhance fuel efficiency, economic stability, and energy diversification in Ghana.