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Investigating the Impact of Growth of Petroleum Products Consumption on Economic Development with a Systematic Dynamics Approach in Developing Countries

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  • Hossein-Ali Fakher

    (Department of Energy Economy, Faculty of Environment and Energy, Science and Research branch, Islamic Azad University, Tehran, Iran.)

  • Seyed Ahmad Goldansaz

    (Department of Energy Economy, Faculty of Environment and Energy, Science and Research branch, Islamic Azad University, Tehran, Iran.)

Abstract

In addition to labor force and capital, energy plays a significant role in the production of commodities and services. Energy is the driving force of production activities. Therefore, it is an essential ingredient of growth and development. Results obtained from this paper show that the growth of oil products consumption has a positive effect on economic development via two channels: Firstly, increase of oil products consumption results in an increase of the profit of firms’ consumption, and subsequently, increase of firms’ motivation leads to more application of advanced equipment and high technologies and, ultimately, enhancement of development. Secondly, increase of oil products consumption leads to an increase in the employment of labor force, and subsequently, an increase of capital and investing equipment; this will ultimately be followed by the improvement of development. At last, this development turns into a factor for the higher usage of oil products aiming at higher production and profits. Also, in this paper, we present four hypotheses about the relationship between energy consumption and economic growth, including: Growth Hypothesis, Conservation Hypothesis, Feedback Hypothesis, and Null Hypothesis. The results show that Conservation Hypothesis and Null Hypothesis are rejected, but Growth Hypothesis and Feedback Hypothesis are accepted for Iran and the countries which have a significant dependence on energy.

Suggested Citation

  • Hossein-Ali Fakher & Seyed Ahmad Goldansaz, 2015. "Investigating the Impact of Growth of Petroleum Products Consumption on Economic Development with a Systematic Dynamics Approach in Developing Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 19(3), pages 279-293, Autumn.
    • Handle: RePEc:eut:journl:v:19:y:2015:i:3:p:279
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