The effect of energy prices on energy consumption efficiency in the petrochemical industry in Iran

Abstract

The main purpose of this study is to analyze the effect of energy prices on consumption energy consumption efficiency in the petrochemical industry in Iran during the period 1994–2012. Also, in order to avoid the bias (bias, error) omitted variables, a number of determinants of energy consumption efficiency, i.e. the ratio of workforce to energy, the ratio of capital to total energy consumption, the price of labor, cost of capital and technology are used within the framework of an econometric model. For this purpose, based on the Cobb-Douglas production function, extended average energy consumption efficiency in the petrochemical industry is measured. Then, using the approach ARDL (Autoregressive Distributed Lag Model), the effect of explanatory variables on the dependent variable has been analyzed. The results show that energy consumption efficiency index in the petrochemical industry of Iran has a long-term trend growing; however, this index has been relatively high volatility. In addition, according to the findings, energy prices had a significant and positive effect on energy consumption efficiency. Also, the ratio of workforce to total energy consumption, the ratio of capital to total energy consumption and the price of capital and technology have a significant and positive effect on total energy consumption efficiency in the petrochemical industry. Keywords: Energy consumption efficiency, Energy prices, Petrochemical industry, ARDL, Model