In this paper attempts are made to identify determinants of gasoline and diesel demand rninrnEthiopia. The study estimates gasoline and diesel demand using time series data startingrnfrom 1964/65 to 1999/2000. To determine whether there exists long-run relation betweenrngasoline and diesel demand and its fundamentals, the Johansen procedure of co-integrationrnanalysis is used. Accordingly, there exists one unique co-integration relation betweenrngasoline and diesel demand, and its fundamentals. The long-run gasoline demand resultrnshows that price of gasoline, population growth and urbanization are found to be statisticallyrnsignificant while price of diesel (relative price), real income per capita, gasoline usingrnvehicles and real foreign exchange earnings are insignificant. Similarly in the case of dieselrndemand; price of diesel (own price), price of gasoline (relative price), real income per capita,rnurbanization and diesel using vehicles are found to be statistically significant whilernpopulation growth and real foreign exchange are insignificant. In the short-run, price ofrngasoline and diesel, gasoline and diesel using vehicles are statistically significant. In termsrnof elasticities, gasoline and diesel prices are inelastic while income is marginally elastic forrnboth demand model. Therefore, diesel is a substitute to gasoline in the long-run and has norneffect on both demand in the short-run.rnFinally, since gasoline and diesel price is inelastic in the short-run, the quantity of gasolinernand diesel demand is far less responsive to price changes, while the marginal incomernelasticity suggesting that gasoline and diesel demand continue growing as income of thernsociety increases. However, the prices are tightly controlled and fixed by the government,rnand it uses cross subsidization as a deliberate means to influence the pattern of energyrndemand