The socioeconomic factors of investment-induced petroleum consumption: case of fast developing Chinese economy

Abstract

Capital investment stimulates a sizable portion of petroleum consumption, especially in emerging economies. However, investment-embedded petroleum consumption (IEPC) and the socioeconomic factors that influence it are not well studied. Our study's objective is to close this research gap. Our article estimates the effects of petroleum intensity, technology, investment structure, and economic development on China's IEPC using input–output and bipolar structural decomposition analysis. Additionally, our article develops a previously mostly unknown index of investment intensity. The findings indicated that, on average, between 1990 and 2016, investment induced nearly 30% of China's total final demand-embedded petroleum consumption. On average, petroleum intensity had the most significant decreasing effect on the Chinese IEPC. Averagely, technology had a positive impact, but from 2010 to 2016, it had a noticeable negative impact (− 1.51 exajoule). Both investment intensity and economic development had a significant upward effect. The impact of investment intensity was the smallest of all the factors. Disaggregation of the effects of socio-economic factors at the sectoral level revealed distinct patterns. Thus, by focusing on the socioeconomic dynamics of key sectors, the factors' current decreasing effects can be maximized, and their increasing effects minimized.