An Estimation of Natural Gas Demand in Household Sector of Iran; the Structural Time Series Approach

Natural gas is one of the most important energy for household sector in entire the world. Iran has rich gas reserves and after Russia, Iran has the largest natural gas reserves in entire the world. A study of natural gas demand is very important and crucial for policy makers of energy sources in Iran. With a good estimation of natural gas demand as a result a good forecasting of natural gas demand, policy makers of energy sources can to plan an accurate energy planning. The aim of this paper is analyzing the effective factors on natural gas demand in household sector of Iran. For do it, we have used structural time series method with Kalman Filter algorithm during 1974-2010 period. Results indicate that time trend as a proxy for technology and non-economic factors is non-linear process and the elasticity of demand to price of natural gas is -0.50. Also, the elasticity of natural gas demand to price of electricity as a substitute commodity for natural gas is 0.48. The elasticity of gas demand to gas splits and real GDP per capita is 2.37 and 0.72 respectively. Conclusion: The elasticity of demand to price of natural gas is -0.50 that it shows that natural gas is an essential commodity for household sector in Iran.