Abstract
Oil price volatility is argued to be one of the incentives behind the rising prominence of renewable energy as a strategy to minimize oil dependence. Therefore, this study seeks to examine the impact of oil price volatility on renewable energy consumption in Nigeria from 1986-2017. A Vector Error Correction Model (VECM) was employed to achieve this objective. The variables were confirmed to exhibit a long run association. A unidirectional causality was also observed running from renewable energy consumption to oil price volatility. The impulse response function test shows that renewable energy consumption is positively influenced by oil price volatility in Nigeria. The variance decomposition result shows that real GDP causes the largest variation in renewable energy consumption amongst all the variables employed. The study recommends that public policies should be put in place to create awareness about the importance of the renewable energy sector and its potentials to lower health cost, mitigate climate change and helps Nigeria to attain energy security in the long run. Keywords: Oil Price Volatility, Renewable Energy Consumption, Vector Error Correction Model, Nigeria JEL Classifications : K32, P18, Q28 DOI: https://doi.org/10.32479/ijeep.9376
Highlights
Crude oil was discovered in the 1800s and ever since it has been a vital energy source to the global economy (Nwanna and Eyedayi, 2016)
renewable energy consumption (REC) and CO2 are less than 3 while the kurtosis value of RGDP and oil price volatility (OPV) is greater than 3 depicting a normal distribution while only OPV is less than 3
In the 1st year, about 41 per cent of variations oil price volatility is explained by own innovations, declining to 33 per cent in the 5th year and declining further to 32 per cent in the long run
Summary
Crude oil was discovered in the 1800s and ever since it has been a vital energy source to the global economy (Nwanna and Eyedayi, 2016). When crude oil price increased from $55.69 in 2005 to $101.43 in 2008, growth rate responded positively by increasing from 6.4 per cent in 2005 to 6.7 per cent in 2008. There was an immense drop in the price of oil from $100.85 in 2014 to $52.95 in 2015 and further declined to $43.74 in 2016. The growth rate in Nigeria dropped from 6.3 per cent in 2014 to as low as 2.65 per cent in 2015. In 2016, growth further declined to -1.61 and the economy slid into recession (World development indicator, 2018). This depicts how the growth rate of the Nigerian economy oscillates with changes in crude oil price
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