Oil prices and the load capacity factor in African oil-producing OPEC members: Modeling the symmetric and asymmetric effects

Abstract

Most oil-producing economies are heavily dependent on oil. Although this situation allowed some of them to grow rapidly, particularly during high oil prices, it may have adverse environmental repercussions. The purpose of this research is to empirically investigate the symmetric and asymmetric effects of oil prices on the load capacity factor in seven African oil-producing OPEC countries between 1990 and 2018. The paper employs the PMG-ARDL model to estimate the symmetric effects of oil prices, while the asymmetric effects are obtained using the PMG-NARDL. The empirical findings suggest slope heterogeneity and cross-section dependence, while the Westerlund cointegration test confirms the existence of a significant long-run relationship. The PMG-ARDL test reveals no evidence of significant symmetric effects of oil prices on the load capacity factor in the short- and long-run. On the contrary, the PMG-NARDL model indicates that the load capacity factor is negatively affected by oil price increases, with short-run effects exceed long-run effects. These results still hold when employing the CS-ARDL and CS-NARDL models. Moreover, the results suggest the validity of the Load Capacity Curve hypothesis with a turning point ranging between 6674 and 7623 dollars per capita. Finally, the causality analysis confirms the previous results, as the load capacity is only caused by oil price increases.