Energy Consumption in the GCC Countries: Evidence on Persistence

Abstract

This paper examines the statistical properties of energy consumption in the GCC countries applying fractional integration methods to annual data from 1980 to 2014. The results indicate that both the raw and the logged series exhibit a (statistically significant) linear time trend in the case of Bahrain, Oman and Qatar, and the raw series only in the case of Saudi Arabia. Mean reversion (and thus only transitory effects of shocks) is found in the case of Bahrain for both the raw and logged data, and in Qatar for the logged series. In the remaining cases, the unit root hypothesis (implying permanent effects of shocks) cannot be rejected except for the logged data in Saudi Arabia, since the order of integration of the series is found to be statistically higher than 1 in that country. The implication of these findings is that in the case of Bahrain and Qatar exogenous shocks to energy consumption have transitory effects, which disappear in the long run without the need for policy action, whilst the permanent nature of the effects of shocks elsewhere means that appropriate policies have to be designed to restore equilibrium.