Energy and GDP growth

Abstract

PurposeThe purpose of this paper is to examine the relationship between the growth in energy use and the growth of gross national product (GDP) 1950‐2004. How closely are the two related? Does this relationship vary in strength between rich and poor countries, between market economies and centrally planned economies, and between oil exporting and oil importing nations? Does its strength depend on the price of oil?Design/methodology/approachThe paper uses linear regression of the growth rate in energy use on the growth rate in GDP for 171 countries, GDP per capita, and the price of oil, run for all 171 countries and for subsets of rich, medium rich and poor countries, market economies versus centrally planned economies, and oil exporting versus oil importing countries.FindingsThere is a significant positive relationship between growth in energy use and growth in GDP for all countries taken together and for all subsets of countries, although not necessarily proportional. There is some indication that growth in energy use declines with GDP per capita, for any given growth in GDP. There is a significantly negative relationship between the price of oil and the growth in energy use for all countries taken together and for all subsets of countries, except for planned economies and for oil exporting countries.Research limitations/implicationsGiven that most of the world's primary energy comes from fossil fuels, it is going to be very difficult to reconcile reductions in carbon dioxide emissions with continued economic growth, especially in poor and medium rich countries.Originality/valueThere are few if any studies which have considered the relationship between energy use and GDP growth for such a large sample of countries, stretching as far back as to 1950 for the countries for which data are available for such a long period.