Oil for Pakistan: What are the main factors affecting the oil import?

Oil is the second largest primary source of energy supply in Pakistan, which is linked to numerous sectors. The existing study aims to calculate the crude oil import demand in Pakistan as a function of real income and the real price of crude oil from 1986 to 2018. We carried out the autoregressive distributive lag method to measure the robustness of price and income elasticities and forecasted crude oil import dependency analysis based on a fitting line from 1986 to 2035. The empirical outcomes of the study are first, the price and income elasticities are consistent with the theoretical prospects, which confirm that income elasticity is significant, while price elasticity is insignificant. Second, the positive growth of income elasticity is 0.21 proposes that imported crude oil in Pakistan is rising income level due to sectorial oil consumption. Third, the two-dimensional imported crude oil and forecasted oil dependency during 2019–2035 estimated that Pakistan's imported crude oil dependency would increase annually by 0.07 %, and 76 % dependency would reach until 2035. Finally, being a necessary product, the Government should support macroeconomic regulation and strengthen the mechanism of oil security and price regulations. Furthermore, the policy suggestions provided below will help Pakistan's policymakers respond appropriately. •We estimated the price and income elasticities of imported crude oil in Pakistan.•An ARDL method is used to measure the robustness of price and income elasticities.•Income elasticity is significant while price elasticity is insignificant.•Imported crude oil in Pakistanis more responsive to changes in income level.•Pakistan's imported crude oil dependency increases yearly by 0.07 % and 76 % in 2035.