Modeling final energy demand and the impacts of energy price reform in Saudi Arabia
Modeling final energy demand and the impacts of energy price reform in Saudi Arabia
We model energy demand across five end-use sectors and 15 energy products in Saudi Arabia, generating comprehensive price and income elasticity estimates. Using the Structural Time Series Model, we demonstrate that the trends underlying energy demand are generally stochastic, underscoring the importance of using such models for estimating unbiased elasticities. Our estimates reveal that energy demand in Saudi Arabia is price inelastic in all cases and income inelastic in most cases, with industrial natural gas and electricity being the only exceptions. Nevertheless, we find extensive variation in the elasticities across sectors and energy products, highlighting the importance of using sector- and product-specific elasticity values and not assuming they are similar in the same country. We then use our estimated elasticities to conduct a welfare analysis of the energy price reforms implemented in 2016 and 2018. Our analysis reveals that the 2016 reform delivered a total annual welfare gain of 11.6 billion 2010 United States Dollars (USD) in 2016. Following the 2018 reform, the annual welfare gain increased to 17.0 billion 2010 USD in 2018. We also estimate the cumulative carbon dioxide emissions avoided between 2016 and 2018 due to energy price reform at 164 million tonnes.
Elasticities, Energy demand, Energy price reform, Saudi Arabia, Time series econometrics, Welfare analysis
De Lipsis, Vincenzo
92ad4463-49f5-412e-b0fc-0a4497767dbe
Gasim, Anwar
ae657dee-ebb7-4d75-bb27-640b940ef19c
Agnolucci, Paolo
2b9a09fe-bc65-4377-8c00-a1505abe1978
Ekins, Paul
360b7a75-4e28-44c6-8709-25325582c075
1 April 2023
De Lipsis, Vincenzo
92ad4463-49f5-412e-b0fc-0a4497767dbe
Gasim, Anwar
ae657dee-ebb7-4d75-bb27-640b940ef19c
Agnolucci, Paolo
2b9a09fe-bc65-4377-8c00-a1505abe1978
Ekins, Paul
360b7a75-4e28-44c6-8709-25325582c075
De Lipsis, Vincenzo, Gasim, Anwar, Agnolucci, Paolo and Ekins, Paul
(2023)
Modeling final energy demand and the impacts of energy price reform in Saudi Arabia.
Energy Economics, 120, [106589].
(doi:10.1016/j.eneco.2023.106589).
Abstract
We model energy demand across five end-use sectors and 15 energy products in Saudi Arabia, generating comprehensive price and income elasticity estimates. Using the Structural Time Series Model, we demonstrate that the trends underlying energy demand are generally stochastic, underscoring the importance of using such models for estimating unbiased elasticities. Our estimates reveal that energy demand in Saudi Arabia is price inelastic in all cases and income inelastic in most cases, with industrial natural gas and electricity being the only exceptions. Nevertheless, we find extensive variation in the elasticities across sectors and energy products, highlighting the importance of using sector- and product-specific elasticity values and not assuming they are similar in the same country. We then use our estimated elasticities to conduct a welfare analysis of the energy price reforms implemented in 2016 and 2018. Our analysis reveals that the 2016 reform delivered a total annual welfare gain of 11.6 billion 2010 United States Dollars (USD) in 2016. Following the 2018 reform, the annual welfare gain increased to 17.0 billion 2010 USD in 2018. We also estimate the cumulative carbon dioxide emissions avoided between 2016 and 2018 due to energy price reform at 164 million tonnes.
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Accepted/In Press date: 15 February 2023
e-pub ahead of print date: 24 February 2023
Published date: 1 April 2023
Keywords:
Elasticities, Energy demand, Energy price reform, Saudi Arabia, Time series econometrics, Welfare analysis
Identifiers
Local EPrints ID: 476156
URI: http://eprints.soton.ac.uk/id/eprint/476156
ISSN: 0140-9883
PURE UUID: 3714ceee-d4c0-48f4-b32d-4b123f8e33bd
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Date deposited: 12 Apr 2023 16:56
Last modified: 17 Mar 2024 04:09
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Author:
Anwar Gasim
Author:
Paolo Agnolucci
Author:
Paul Ekins
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