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Convergence of oil consumption: A historical perspective with new concepts

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  • Nazlioglu, Saban
  • Kassouri, Yacouba
  • Kucukkaplan, Ilhan
  • Soytas, Ugur

Abstract

Growing concerns about long-run equilibrium in the oil market have focused on understanding the time path of oil consumption across countries. This study examines the convergence of oil consumption across the largest oil consumers. To this end, we employ the historical oil consumption data dating back to 1890 by benefiting from the newly proposed convergence concepts, including relative/club convergence and weak σ-convergence, in addition to the conventional β-convergence notion. The empirical results provide new and insightful findings. First, considering common factors in the dynamics of oil consumption leads to convergence. Second, the overall evidence of absolute convergence has been at work among countries mainly before the great depression 1890–1929, while divergence occurs after the mid of 1990s. Third, the divergence observed over the last decades persists even after accounting for either a relative or weak form of convergence, supporting the primary role of the current dynamics in world oil markets. Divergence calls for stricter energy transition policies. Moreover, the clustering algorithm identifies unique convergent clubs, indicating that a unified energy policy is not tenable.

Suggested Citation

  • Nazlioglu, Saban & Kassouri, Yacouba & Kucukkaplan, Ilhan & Soytas, Ugur, 2022. "Convergence of oil consumption: A historical perspective with new concepts," Energy Policy, Elsevier, vol. 168(C).
  • Handle: RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003755
    DOI: 10.1016/j.enpol.2022.113150
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    More about this item

    Keywords

    Oil consumption; Convergence; Panel data; Common factor;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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