Dynamics of electricity consumption, oil price and economic growth: Global perspective

This study uses the data from 157 countries from 1960 to 2014 to analyze the relationship between economic growth, electricity consumption, oil prices, capital, and labor. The economic growth of developing countries with industrial infrastructure has a more significant association with electricity consumption than oil prices. We use oil prices and electricity consumption jointly to study highly predictive observations for economic growth. The data are categorized by income, OECD and regional levels. The panel cointegration, long-run parameter estimation, and Pool Mean Group tests are used to analyze the cointegration and short-run and long-run relationships between the variables. The empirical results indicate the presence of cointegration between the variables. The presence of feedback effects between electricity consumption and economic growth, oil prices and economic growth is valid. These findings confirm that in spite of the oil prices, developing countries rely heavily on electricity consumption for economic growth. In the short run, growth and feedback effects suggest that more vigorous electricity policies should be implemented to attain sustainable economic growth for the long-term. •The dynamic relationship between electricity consumption, oil price and GDP is analyzed.•Pedroni panel cointegration test are used over 157 countries and subsamples.•Full panel confirmed Bidirectional relationship found between electricity consumption, oil price and GDP.•Developing countries heavily reliance on electricity consumption despite of oil prices for economic growth.•The finding varies across income, OECD and regional level.