Welfare analysis of household demand for vehicle fuel
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2012
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2555
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eng
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111 leaves : ; 30 cm.
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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Wilaiwan Sirirotjanaput (2012). Welfare analysis of household demand for vehicle fuel. Retrieved from: http://repository.nida.ac.th/handle/662723737/612.
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Welfare analysis of household demand for vehicle fuel
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Abstract
Thailand has adopted policies that promote the use of biofuel produced from local crops to reduce the country’s dependence on imported fossil fuel. The pricing policy was designed to encourage greater use in the transportation sector of gasohol, which is a blend of gasoline and ethanol. It consists of two measures, namely, a subsidy on gasohol and a tax on gasoline. Their effect was to make gasohol price lower than that of gasoline so that motorists might use more gasohol, which is a substitute to gasoline. However, the economic impact of the measures was welfare loss and inefficiency, which was the result of the increasing difference between the MRS and MRT of both products as gasohol consumption increased. In this regard, the influence of households’ socio-economic characteristics and other factors on vehicle fuel consumption and the impacts of the existing pricing policy were examined so that an alternative pricing policy that should lead to the highest efficiency of both fuels and increase gasohol consumption with the least cost could be proposed in this study. To address these two research questions the study was divided into two parts: first, a micro-analytic empirical approach was used to investigate vehicle fuel demand patterns of households, which cannot be revealed by macro-data. The complete demand analysis based on micro level data was then carried out to assess the effects of price and non-price factors, deriving results of demand elasticities for each vehicle fuel items, particularly E10-gasohol and gasoline. Second, the demand elasticities, both uncompensated and compensated, were used to determine the alternative pricing policy to support the use of gasohol as a gasoline substitute. The welfare measure used to examine the highest efficiency of pricing policy is the compensating valuation. The results found that the consumption pattern of households for vehicle fuels is determined by their total vehicle fuel expenditure, the prices they pay for the fuels, and by the gender, age and educational attainment of the household head. The analysis also revealed that, based on the 2009 prices of gasoline and gasohol which were influenced by the pricing policy, a welfare loss of THB 115,158.59 million was incurred. This was approximately 15% of the expenditure on vehicle fuel consumption in 2009.From these findings, the short term a retail price structure of gasoline and gasohol should be based on economic efficiency to reduce the welfare loss. For the long term, the efficient retail price structure of both fuels should be incorporated with the program to increase the efficiency of ethanol production and a higher ethanol blending. These measures would increase gasohol consumption at the least cost.
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Thesis ( )--National Institute of Development Administration.