The study of the demand function of Cananda´s exported oil for the United States

Being the largest exporter of crude oil to the U.S., Canada has increased its crude oil exported to the United States these years. In this paper I studied the demand function for Canada to export its crude oil to the United States. The final model I found is a linear dynamic model which reflects habit persistence between sequential periods. The joint significance test for the model revealed a result that, in the long-run, the export price of the oil itself and the prices of its substitutes have little influence on its demand function. And after examined the model further, I concluded that due to a joint influence by the exchange rate and the inflation, the exchange rate in the model has a negative contribution to the oil demand.