Correlation between energy usage and the rate of economic development

This paper reviews the correlation between per capita GDP and per capita consumption of different sources of energy for OPEC Member Countries, the G‐7 and three Asian countries, both with and without natural logarithm. In addition, the paper estimates the ratios for total GDP and total energy consumption of different sources of energy and also estimates GDP energy consumption elasticities. The paper concludes that on a per capita basis most OPEC Countries exhibit negative and weak relationships for all forms of energy, including electricity. For the G‐7 and Asian countries, this relationship is positive and strong, with the exception of oil for G‐7 countries, where there is a weak correlation. Surprisingly, most OPEC Countries showed a comparatively strong and positive correlation when tested for total GDP in relation to total energy consumption of the respective energy sources. The relationship for the rest of the countries remains unchanged. Population might have distorted the results in OPEC Countries. These results suggest that one should be cautious when drawing conclusions and not ignore the aggregate comparison, as this could otherwise lead to wrong results. For G‐7 countries, there has been a significant shift in the pattern of energy consumption in relation to GDP when comparing 1960–73 and 1973–2001. All adjusted downward in the later period. However, the greatest adjustment was associated with petroleum consumption. The general conclusion is that wealth creation in G‐7 countries is directly associated with the efficient use of all forms of energy. In contrast, most OPEC Countries exhibit a weaker linkage between energy consumption and economic development on a per capita basis, probably due to inefficient usage of resources or due to disproportionate distribution of wealth and thus energy usage.