AN ECONOMETRIC ANALYSIS OF THE U.S. ASPHALT INDUSTRY

The objective of this research has been to analyze the factors which influence the price, demand, and supply of asphalt in the U.S. and to test the hypothesis that likely adjustments to recent price changes and changes in refining technology will lead to significant increases in U.S. demand for asphalt imports during the period 1980 to 1983. It is hypothesized that structural changes in petroleum markets that encourage refiners to maximize the yield of lighter petroleum products such as gasoline, from a barrel of oil, will lead to shortages in the supply.;The study examines a number of possibilities for filling the gap between projected U.S. demand and supply. These include: (1) increased asphalt imports; (2) increased domestic supply of asphalt at the sacrifice of supply of lighter petroleum products; (3) decreased demand for roads and hence asphalt due to economic recession.;Although it is concluded that some combination of these approaches will probably result, imports are expected to play a major role in satisfying the excess demand. Hence, exporting countries will benefit from the structural shifts in the U.S. petroleum refining industry.;A microeconometric market model was specified based on standard economic assumptions about the behavior of asphalt producers and consumers. This model was estimated with historical data and the results wre used as a basis for baseline and policy forecasts for the period 1980-1983. The results of these forecasts confirm the hypothesis of supply shortages during the forecast period.