**1. Introduction**

The OECD1 countries have encountered many challenges throughout the years, including rapidly aging societies and diminishing fertility rates. The share of the senior population (those over 65 years old) climbed from less than 9% in 1960 to 17% in 2015, and it is anticipated to continue to rise, reaching 28% in 2050.<sup>2</sup>

Furthermore, since 1970, most OECD countries have faced the difficulty of a primarily urban population. In OECD countries, particularly Australia, Korea, Chile, France, and Japan, urbanization is higher, and the trend is anticipated to continue.<sup>3</sup>

Because demographic shifts pose serious distributional issues and are projected to have significant economic effects, OECD nations must take these factors into account.

Indeed, natural gas' adaptability, low price, and lower greenhouse gas emissions from combustion than coal and oil have pushed natural gas demand to rise rapidly, gaining share in all sectors, particularly residential. Residential natural gas usage has

<sup>1</sup> Organization for Economic Co-operation and Development.

<sup>2</sup> Health at a Glance 2017.

<sup>3</sup> Trends in Urbanization and Urban Policies in OECD Countries 2010.

risen consistently in OECD countries over time. The amount has increased from around 8 million terajoules (TJ) in 1980 to more than 11 million TJ in 2016. As shown in **Figure 1**, the total has moved from about 8 million terajoules (TJ) in 1980 to more than 11 million TJ in 2016. Moreover, in order to understand the individual trend of per capita residential natural gas consumption considered as the dependent variable, during the period of study (2005–2016), per capita natural gas demand was plotted in a time-series graph for each country in **Figure 2** and note that each country has its own specific trend.

These two figures are useful for econometric reasons since they show the evolution of aggregate and per capita individual demand for natural gas in the residential sector over time.

**Figure 1.**

*Evolution of aggregate residential consumption for natural gas in OECD countries (terajoules, 1980–2016). Reference: own elaboration based on IEA data.*

#### **Figure 2.**

*Evolution of per capita residential consumption for natural gas by country (MWh, 2005–2016). Reference: own elaboration based on IEA data.*

*The Dynamic of Residential Energy Demand Function: Evidence from Natural Gas DOI: http://dx.doi.org/10.5772/intechopen.102451*

In fact, knowing the numerous factors of residential natural gas consumption and thus estimating the demand equation accurately is critical to creating natural gas legislation and corporate strategies for investors in the natural gas residential sector. To estimate household natural gas demand, the literature has concentrated on the effect of price and income. The majority of these research used static or dynamic models, or both, to simulate natural gas consumption behavior.

In previous energy research [1–5], demographic factors such as the elderly, population density, and urbanization have received little attention, despite the fact that they influence household natural gas consumption explicitly or implicitly. Furthermore, with the exception of Gautam et al. [5], the majority of these research are based on data from before 2010, and it is critical to update studies, especially in this economic field where inputs are rapidly changing.

Policymakers need to know not only how natural gas demand will respond to income and price changes in order to make holistic decisions.

The goal of this research is to estimate the dynamics of per capita residential natural gas demand in 29 OECD nations from 2005 to 2016. The rest of the paper is organized as follows. A brief survey of the literature is presented in Section 2. Section 3 gives a description of the data as well as some descriptive statistics. In Section 4, the estimation findings are shown. A brief conclusion is included in the concluding section.
