Oil Price and Energy Depletion Nexus in GCC Countries: Asymmetry Analyses

Abstract

Oil price has played a prominent role in oil exporter economies and may also affect energy depletion in oil-dependent countries. Considering asymmetry, the relationship between oil price (OP) and energy depletion has been investigated in the Gulf Cooperation Council (GCC) region from 1970 to 2017. We find asymmetrical positive effects of OP on the energy depletion in the panel of the GCC region. To avoid aggregation biasness in the panel estimates, we also conduct a time-series analysis on each GCC country. We find a positive impact of increasing OP on the energy depletion in six GCC countries, and this effect is found to be elastic in the case of all countries except for Kuwait. Positive effects of decreasing OP on the depletion are also found in all the GCC countries, and these effects are found to be elastic or unit elastic in the case of all countries except Saudi Arabia. Asymmetry in the relationship of oil price and energy depletion is established for Bahrain, Kuwait, and Saudi Arabia in terms of the different magnitude of effects.

The Oil Price and Trade Nexus in the Gulf Co-Operation Council Countries

“…Alkhateeb and Mahmood [35] Saudi Arabia A positive and asymmetrical relationship was found between oil prices and energy depletion.…”

“…In disaggregated analyses, they found that the construction sector and public sector played a great role in increasing remittances' outflows. Alkhateeb and Mahmood [35] probed the oil prices and energy depletion nexus and found that oil prices had a positive and asymmetrical effect on the energy depletion in the GCC region. Erdogan et al [32] probed the impact of oil price volatility on military expenditures in Bahrain, Kuwait, KSA, and Oman.…”

“…In the relationship between oil prices and macroeconomic performance, the bulk of the literature has investigated the relationship between oil prices and the stock market in the Gulf Co-operation Council (GCC) countries [15][16][17][18][19][20][21][22][23][24][25]. Moreover, the literature also probed the effect of oil prices on economic growth [26], personal consumption [27], foreign direct investment inflows [28], government spending and fiscal deficits [29,30], employment [31], military spending [32], external surpluses [33], exchange rates [25], energy consumption [34], and on energy depletion [35]. Gazdar [36] probed the effect of the oil term of trade shocks on economic growth, and Jouini [37] explored the effect of trade openness on the economic growth of the GCC region.…”

Role of Oil Price in Fiscal Cyclicality in Saudi Arabia

“…However, some studies tested the effect of oil price (OP) on different macroeconomic indicators. For instance, there are some studies on the effect of OP on energy depletion in GCC countries (Alkhateeb and Mahmood, 2020b), the effect of OP on stock markets of GCC countries (Siddiqui et al, 2019), the effect of OP on capital formation in GCC countries (Alkhateeb and Mahmood, 2021) the effect of OP on capital formation in GCC countries (Alkhateeb and Mahmood, 2020a), the effect of OP on consumption in Saudi Arabia (Mahmood and Zamil, 2019), the effect of OP on investments in Saudi Arabia (Mahmood and Alkhateeb, 2018) and the effect of OP on employment in Saudi Arabia (Alkhateeb et al, 2017a(Alkhateeb et al, , 2017b. In the MENA region, Slimane et al (2010) has corroborated a procyclicality of fiscal policy in the whole MENA region.…”

Oil Price and Industrial Growth in Saudi Arabia: Sectoral and Asymmetry Analyses

“…The effect of OP on the other macroeconomic indicators has also been investigated in the GCC region. For example, GCC literature corroborated that OP has a positive effect on the military spending (Erdogan et al, 2020), a positive effect on the energy depletion (Alkhateeb and Mahmood, 2020) a positive effect on the capital formation (Alkhateeb and Mahmood, 2021), a positive effect on the remittances outflows (De et al, 2019), a positive effect on trade performance (Metwally, 1993) and a positive effect on the exchange rate (Al Rasasi, 2017).…”