Abstract
Growing concerns about long-run equilibrium in the oil market have focused on understanding the time path of oil consumption across countries. This study examines the convergence of oil consumption across the largest oil consumers. To this end, we employ the historical oil consumption data dating back to 1890 by benefiting from the newly proposed convergence concepts, including relative/club convergence and weak σ-convergence, in addition to the conventional β-convergence notion. The empirical results provide new and insightful findings. First, considering common factors in the dynamics of oil consumption leads to convergence. Second, the overall evidence of absolute convergence has been at work among countries mainly before the great depression 1890–1929, while divergence occurs after the mid of 1990s. Third, the divergence observed over the last decades persists even after accounting for either a relative or weak form of convergence, supporting the primary role of the current dynamics in world oil markets. Divergence calls for stricter energy transition policies. Moreover, the clustering algorithm identifies unique convergent clubs, indicating that a unified energy policy is not tenable.
| Original language | English |
|---|---|
| Article number | 113150 |
| Journal | Energy Policy |
| Volume | 168 |
| Number of pages | 12 |
| ISSN | 0301-4215 |
| DOIs | |
| Publication status | Published - 2022 |
Bibliographical note
Funding Information:By using LM and residual augmented least squares (RALS)-LM tests, Payne et al. (2017) find out convergence in per capita renewable energy consumption across US states; Cai and Menegaki (2019) provide support for convergence of clean energy consumption in several OECD countries, Akram et al. (2020) reveal evidence of convergence for energy consumption categories. More recently, Ahmed Qahtan et al. (2021) indicated strong evidence for stochastic convergence in renewable and nonrenewable energy consumption in oil-exporting and importing nations in the MENA region. The extant empirical studies do not provide unanimously strong results. As pointed out in Kassouri (2022), this can partly be explained by the fact that oil consumption follows a more complex (hybrid) pattern, which conventional methods cannot effectively capture. This study adds to the literature by employing a recent methodology to account for weak convergence, convergent clubs, and cross-sectional dependence among countries.
Publisher Copyright:
© 2022 The Authors
Keywords
- Common factor
- Convergence
- Oil consumption
- Panel data
