Journal of Economic Policy Researches
Investigating the Stationarity Properties of Oil Consumption: an Empirical Analysis for OECD CountriesFatma Kızılkaya
In a changing and developing world, production activities are dependent on energy resources. A significant part of the energy needed in the world is obtained from fossil fuels. Petroleum is one of the three main types of fossil fuels, along with natural gas and coal, widely used in various economic activities such as transportation, construction, industry, housing, and electricity generation. The limited reserves of petroleum, which have a wide usage area, is a significant problem. Due to the close relationship between energy consumption and macroeconomic variables, policymakers must investigate the stationarity properties of energy consumption. If energy consumption is stationary, a shock to energy consumption will be temporary. However, if the energy consumption is not stationary, the effect of the shocks will be permanent. This study investigates whether oil consumption is stationary for OECD countries. The analyses are carried out using a panel stationarity test with sharp and smooth breaks for 1965-2019. In this test procedure, dummy variables, in which the break dates are determined endogenously, are used for sharp breaks, while the Fourier approach captures smooth breaks. The findings reveal that the oil consumption series is stationary for the panel. Since the oil consumption series does not include a unit root, it is understood that the shocks to oil consumption are temporary and will return to their previous state in time. According to the individual stationarity test results, the oil consumption series for 23 countries is obtained as stationary. According to these results, it is possible to say that the policies to be implemented for sustainable development goals in OECD countries may have different effects on each country.
Petrol Tüketiminin Durağanlık Özelliklerinin Araştırılması: OECD Ülkeleri için Ampirik Bir AnalizFatma Kızılkaya
Değişen ve gelişen dünyada üretim faaliyetleri enerji kaynaklarına bağımlıdır. Dünyada enerji ihtiyacının önemli bir bölümü fosil yakıtlardan elde edilmektedir. Ulaşım, inşaat, sanayi, konut ve elektrik üretimi gibi çeşitli ekonomik faaliyetlerde sıklıkla kullanılan petrol, doğal gaz ve kömür ile beraber üç ana fosil yakıt türünden biridir. Geniş kullanım alanı olan petrolün rezervlerinin sınırlı olması önemli bir sorundur. Enerji tüketimi ile makroekonomik değişkenler arasındaki yakın ilişki nedeniyle, enerji tüketiminin durağanlık özelliğinin araştırılması politika yapıcılar için oldukça önemlidir. Enerji tüketimi serisinin durağan olması durumunda, enerji tüketimine gelen bir şok geçici olacaktır. Ancak enerji tüketimi durağan değilse, şokların etkisi kalıcı olacaktır. Bu çalışmada OECD ülkeleri için petrol tüketiminin durağanlık özelliği gösterip göstermediği araştırılmaktadır. Analizlerde 1965-2019 dönemleri ele alınmış ve hem keskin hem de yumuşak ve pürüzsüz kırılmaları göz önünde bulunduran panel durağanlık testi kullanılmıştır. Çalışmada kullanılan panel durağanlık testinde keskin kırılmalar, kırılma tarihlerinin içsel olarak belirlendiği kukla değişkenler ile dikkate alınırken, yumuşak kırılmalar ise Fourier yaklaşımı ile dikkate alınmıştır. Elde edilen bulgular panelin geneli için petrol tüketimi serisinin durağan olduğunu ortaya koymaktadır. Petrol tüketimi serisi birim kök içermediğinden petrol tüketimine yönelik şokların geçici olduğu ve zamanla eski haline geri döneceği anlaşılmaktadır. Bireysel durağanlık testi sonuçlarına göre 23 ülke için petrol tüketimi serisi durağan olarak elde edilmiştir. Bu sonuçlara göre, OECD ülkelerinde sürdürülebilir kalkınma hedefleri için uygulanacak politikaların her ülke üzerinde farklı etkileri olabileceğini söylemek mümkündür.
In a changing and developing world, production activities are dependent on energy resources. A significant part of the energy needed in the world is obtained from fossil fuels. One of these fossil fuels, Petroleum, is the primary production input for countries. It is used in almost all automotive, defense, and textile sectors. Therefore, the limited petroleum reserves, which have a wide usage area, are significant. In addition, since the spread of oil resources varies from region to region, some countries are source countries for oil, and some are dependent on oil. The economic importance of oil in all these countries is indisputable.
The Covid-19 pandemic, which emerged in 2019, has affected many sectors. One of these sectors is the energy sector. Global energy demand is estimated to have dropped by 4.5% in 2020 due to the pandemic. The worldwide decline in oil consumption accounts for about three-quarters of the total decline in energy demand. Considering this change in oil consumption, it is crucial to investigate whether the impact of shocks to oil consumption is temporary or permanent. If the oil consumption series is found to be stationary, it means that the shocks to oil consumption are temporary and will return to their previous state in the short term. If the oil consumption series is not stationary, shocks to oil consumption are permanent. Whether the energy consumption is stationary is also necessary to estimate the energy consumption. If the shocks to energy consumption are permanent, it can be expected that critical macroeconomic variables will take over this persistence, given the importance of energy for other sectors in the economy. By transferring this structure of the non-stationary oil consumption variable to other variables, the stationarity properties of many macroeconomic variables can change. However, if the energy consumption series is not stationary, past behavior will not matter in predicting future demand. In other words, it will not be possible to predict the future oil demand with a non-stationary oil consumption series. In this case, it is necessary to consider other variables that explain energy consumption to create future energy demand forecasts.
Unit root tests can examine the impact of shocks on oil consumption. The Fourier approach is used in this study. The Fourier approach can be used to capture unknown structural breaks or neglected nonlinearity in the deterministic component of the model. In addition, the use of the Fourier approach transforms the problem of choosing the appropriate functional form into choosing the most appropriate number of frequencies to include in the approach. In this direction, it is investigated whether the oil consumption series is stationary for OECD countries. The data for the period 1965-2019 and the Fourier stationarity test developed by Li, Ranjbar, and Chang (2015), which considers the cross-section dependency, are used in the analyses. The results obtained for the panel show that the oil consumption series is stationary. According to the results of the individual stationarity test, the oil consumption series for 23 countries (Canada, USA, Colombia, Austria, Belgium, Czechia, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Slovakia, Spain, Sweden, Switzerland, United Kingdom) is obtained as stationary. In addition, the oil consumption series has a unit root for 10 OECD countries (Mexico, Chile, Iceland, Poland, Turkey, Israel, Australia, Japan, New Zealand, Korea). In light of these findings, policymakers should consider and avoid energy design policies in the long term, especially in countries where shocks to oil consumption are temporary. In this case, policies aimed at reducing oil consumption, in the long run, will not be effective in countries where the oil consumption series is stationary.