Oil Production and Carbon Emissions: Spline Analysis of Relationships

Abstract

Obviously, the dynamics of carbon dioxide emissions depends on the volume and structure of consumption of primary energy resources in the economy. The world’s energy consumption shows a growth trend temporarily interrupted during times of economic crisis. The most noticeable decrease in energy consumption in modern history occurred in 2020, which was due to a decline in business activity in the world due to the COVID-19 pandemic. This caused a decrease in carbon emissions (by more than 6% compared to 2019). In the structure of primary energy sources, the largest reduction was in oil consumption. The paper examines the impact of economic crises on the evolution of the mutual link between the dynamics of oil production and carbon dioxide emissions in the world. To detect correlations in local time regions, it is proposed to interpolate process dynamics with cubic splines. Using this toolkit avoids the limitations of classical econometrics on the length of time series. The differentiability of the built spline models allowed us to move on to identifying and analyzing latent correlations in fluctuations in the instantaneous growth rate of oil production volumes and carbon emissions.