Estimating Demand Function of Nile Blend Crude Oil for Far- East Market during the Period

Abstract

The research is an attempted to estimate the Nile Blend crude oil demand function to investigate the real factors which are determined the NBco demand in far east market (Japan – China – Korea) during the period 1999 – 2006, aims to point out the main factors influencing the demand of NBco. Depending on these objectives the study used four variables as an explanatory variable influence demand for NBco, which are the price of NBco the price of the Indonesian crude oil (MINAS), the API gravity factor as an a quality component with SULFURE CONTENT. Assume that the demand of Nile Blend crude oil is inelastic and there is a positive relationship between NBco demand and quality component consisting of API gravity and negative with sulfur content The ordinary least square (OLS) method has been applied to estimate the coefficient, using monthly data for the period 2000-2007 (Sudanese Petroleum Corporation) to formulate the Nile Blend crude oil demand function in Far-East market is specified by the multi-variable partial adjustment equation. The estimated results show that for the price elasticity of Nile Blend crude oil demand is elastic, and there is negative relationship between minas crude oil price and Nile Blend demand. The other explanatory variables which are API and the SULFUR CONTENT both are not significant, when we used them in the estimation. But when we used in other attempting by using partial adjustment model only for the NBco price and the sulfur content we found them are significant and matching the hypotheses. The study recommend that the Sudanese petroleum corporation must concentrated on the Far-East market strategically because there are about 90% of Nile Blend crude oil exports to the far-east, also more research in the impact of the oil industry is mainly needed in this field on the economic performance.