The demand for gasoline and diesel fuel in agricultural use in Virginia

Abstract

The objectives of this study were: (1) to determine the usage patterns of gasoline, diesel fuel, and other fossil fuels in different types of agriculture; (2) to determine the demand relationships for gasoline and diesel fuel in agricultural use and to identify and assess the major factors that affect these relationships; and (3) to determine differences in the demand relations for gasoline and diesel fuel in agricultural use.

The usage patterns of gasoline, diesel fuel, and other fossil fuels in agricultural production in Virginia, the South, and the U.S. were developed from cross-sectional data provided jointly by the Economic Research Service and the Federal Energy Administration. From the static theoretical development and the dynamic and technological adjustment concepts of derived input demand, the theoretical demand relationships for gasoline and diesel fuel were formulated. Asymptotically efficient, asymptotically normal, asymptotically unbiased, and consistent parameter estimates were obtained by employing a generalized least squares (GLS) procedure on the Parks model in combining cross-sectional and time-series data. All data were from the period 1971 through 1976.

The agricultural sector in Virginia appears to adjust to changes in economic factors and other variables influencing the demand for gasoline and diesel fuel. While farmers.appear to be somewhat passive to increases in the real prices of gasoline and diesel fuel in the current period, they are quite responsive to such increases when given time to adjust their usage patterns.