An empirical analysis of gasoline demand in Mexico using cointegration techniques
Economic expansion in Mexico has caused fuel consumption in Mexico to increase. Because Mexico does not have sufficient refinery capacity, over 40 percent of total gasoline consumed is imported. This has implications for the balance of payments. In this paper, gasoline demand is empirically examined using co-integration and error correction approaches. Results show no evidence of long-run equilibrium in the Mexican gasoline market. This is potentially attributable to the regulatory regime that governs energy markets in Mexico. Regulated price adjustments that are not consistent with prevailing market conditions run the risk of misallocating resources. Permitting greater flexibility in private gasoline retail markets may prove beneficial in Mexico.
Elizalde, Mario, "An empirical analysis of gasoline demand in Mexico using cointegration techniques" (2011). ETD Collection for University of Texas, El Paso. AAI1494310.