Electricity consumption, oil price and economic growth: Global perspective

The study uses the panel data of 210 countries over the period 1960–2014 to analyze the empirical relationship between economic growth, electricity consumption, oil price, gross fixed capital formation and population. While the current literature on the topic focus largely on relationship between oil consumption and economic growth while only a few presented the research studying relationship between electricity and economic growth, we used oil price and electricity consumption, jointly, to study the highly predictive observer for economic growth. Furthermore, the data is categorized into income, OECD, regional level, renewable energy consumption level and oil export/import countries. Pedroni panel cointegration, fully modified OLS and panel vector error correction test apply to analyze the cointegration, short run and the long run relationship between the variables. The results of full panel confirm a bidirectional relationship between electricity consumption and GDP, oil price and GDP, fixed capital formation, population and GDP. Moreover, the results confirm that countries using non-renewable sources for electricity generating, such as through coal and oil, the electricity consumption of these countries exhibit a negative relationship with the economic growth. Furthermore, the finding varies across income, OECD and regional, renewable energy consumption level.