Assessing energy price imbalances and effects on fuel consumption patterns across sectors

This study addresses chronic energy price distortions in Iraq and links them to fuel use patterns across sectors. The context is a regulated market with large gaps between administered and opportunity prices that skew the Energy Consumption Structure (ECS). The contribution is twofold. First, construction of absolute and relative distortion indices for coal, oil, and gas over 2003–2023, paired with an ECS measure that elevates electricity and gas shares against coal. Second, integration of dynamic panel estimates using SYS-GMM with an input output price propagation model to trace sectoral responses under regulated and non-regulated settings. Results show large average absolute distortions: gas 23.98 %, oil 13.39 %, coal 6.63 %, with a parallel pattern in relative metrics led by gas. Scenario analysis indicates that correcting gas distortions raises ECS by about 5–13 % across policy settings, adding coal reform lifts ECS by about 8–17 %, while an oil-only correction reduces ECS by about 7–15 % unless accompanied by substitution capacity and safeguards. Fixed-effects robustness reaches R2 0.953, and OLS reaches R2 0.728. Policy sequencing emerges: prioritize gas pricing reform, consolidate with coal adjustments, and condition any oil move on replacement fuels and targeted protection for vulnerable users.