Effects of Energy Carriers and their Price Increases on the National Economic Sectors

Abstract

It is presumed that changes in energy prices directly affect water consumption, especially if abstracted from groundwater resources, because of the vital role energy plays in the different stages of water abstraction and treatment. The present study was, thus, designed and implemented to examine the effects of different energy pricing scenarios on water consumption. The estimated values were obtained according to the dynamic general equilibrium model using 2011 as the base year and different scenarios likely to realize over the following ten years. Results indicate that water price will increase by 4.42% in the base year if a 100% increase occurs in the prices of all the energy carriers, with the contributions of oil products, power, and natural gas to the increased water price being 72.18%, 17.7%, and 10.12%, respectively. Clearly, oil products have the greatest impact on water prices and reductions in water demand in most economic activities. Moreover, a decline, albeit with a certain fluctuation, is observed in water consumption percentages with all the scenarios examined and the values of the variables are predicted to return to their non-shock status so that the shock effects gradually disappear. At lower energy price rates, the reactions to increasing energy prices realized in the form of increased water price and declining water consumption exhibit an exponentially declining trend. It may be concluded that changes in energy prices under the present conditions do not generally lead to any substantial changes in water demands. This may be attributed to the currently rather low energy prices. In the farming and horticulture subsectors, however, reduction in water demand is notable.