Gasoline and Diesel Consumption for Road Transport in Spain: a Dynamic Panel Data Approach

Using a panel data set for Spanish regions between 1998 and 2006, we study the factors explaining per capita fuel consumption for road transport at the macroeconomic level. The contributions of the article are the following. First, we specify a dynamic panel data (DPD) model for gasoline and diesel consumption. Second, we properly apply estimation techniques based on the system Generalized Methods of Moments (GMM) procedure of Arellano and Bover (1995). We find that more traditional estimation procedures (pooling-OLS, the Within-Group or the first difference GMM), which might generate bias estimate in a DPD framework, produce important differences that may even change policy recommendations. Finally, we find important differences between the results for the gasoline and the diesel model. While the estimated equation correctly fits the gasoline consumption behavior, results emphasizes the need to specify a different model for aggregate diesel consumption, which must include aditional determinants than those traditionally used in fuel consumption models.