Accounting for the Effect of Exogenous Non-Economic Variables on Natural Gas Demand in Oil Producing African Countries

Abstract

With less than 50% of the population of Sub-Saharan Africa having access to modern forms of energy and the desire to minimize the impact of energy consumption on the environment, there is a need to invest in an energy source that is affordable, available and environmentally clean. Natural gas is therefore the preferred choice of energy since it has minimum impact on the environment among the fossil fuels and is relatively affordable. In this study, the generalized methods of moments (GMM), a dynamic panel two stage least squares and the general unrestricted model (GUM) through Autometrics™ are employed to estimate the demand for natural gas in oil producing African countries. The GUM suggests that oil producing African countries have been consuming excessive natural gas that seems to offset improved technical efficiency of appliances. The study finds that both economic and technical factors are important drivers of natural gas consumption. In particular, output exerts a positive and significant influence on natural gas demand, whereas energy price and energy resource depletion have a negative and significant effect. It is recommended that energy efficiency measures should be implemented in these countries.