Business Strategies for Managing Non-Renewable Energy Dynamics in Saudi Arabia’s Manufacturing Sector

Understanding the asymmetric relationship between manufacturing output and non-renewable energy consumption is critical for formulating sustainable economic policies, particularly in energy-dependent economies like Saudi Arabia (KSA). This study has two aims. First, it examines how the KSA’s manufacturing sector responds to different energy sources, emphasising non-renewable energy—unlike previous studies that primarily examined general economic growth. Second, it investigates the asymmetric impact of non-renewable energy shocks on manufacturing output. Using yearly data from 1990 to 2022, this study finds that positive shocks to non-renewable energy significantly enhance manufacturing output in both the short and long run, driven by the sector’s reliance on cheap fossil fuels. On the contrary, negative shocks disrupt supply chains, increase energy costs, and reduce output over the same periods. In addition, this study reveals that renewable energy negatively affects manufacturing output due to transition costs and operational inefficiencies. However, gross fixed capital accumulation positively affects industrial production. These findings highlight the need for strategic investments in renewable energy infrastructure to mitigate the negative impacts of non-renewable energy disruptions, enhancing Saudi Arabia’s long-term economic stability. This study also underscores the importance of integrating sustainable development goals (SDGs) into policy frameworks to ensure a balanced and sustainable energy transition.