Iranian Economic Review

Iranian Economic Review

Investigating the Impact of Growth of Petroleum Products Consumption on Economic Development with a Systematic Dynamics Approach in Developing Countries

Document Type : Research Paper

Authors
Hossein-Ali Fakher
Seyed Ahmad Goldansaz
Ph.D. student at Department of energy economy, Faculty of Environment and Energy, Science and Research branch, Islamic Azad University, Tehran, Iran
10.22059/ier.2015.56848
Abstract
I
n addition to labor force and capital, energy plays a significant role in the production of commodities and services. Energy is the driving force of production activities. Therefore, it is an essential ingredient of growth and development. Results obtained from this paper show that the growth of oil products consumption has a positive effect on economic development via two channels: Firstly, increase of oil products consumption results in an increase of the profit of firms’ consumption, and subsequently, increase of firms’ motivation leads to more application of advanced equipment and high technologies and, ultimately, enhancement of development. Secondly, increase of oil products consumption leads to an increase in the employment of labor force, and subsequently, an increase of capital and investing equipment; this will ultimately be followed by the improvement of development. At last, this development turns into a factor for the higher usage of oil products aiming at higher production and profits. Also, in this paper, we present four hypotheses about the relationship between energy consumption and economic growth, including: Growth Hypothesis, Conservation Hypothesis, Feedback Hypothesis, and Null Hypothesis. The results show that Conservation Hypothesis and Null Hypothesis are rejected, but Growth Hypothesis and Feedback Hypothesis are accepted for Iran and the countries which have a significant dependence on energy.
Keywords
Oil Products Consumption
Economic Development
Systematic Dynamics Method
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Iranian Economic Review
Volume 19, Issue 3 - Serial Number 3
Autumn 2015
Pages 279-293