Income, Price, and Government Expenditure Elasticities of Oil in the Gulf Cooperation Council Countries

Abstract

The analysis of the domestic oil consumption data in the six Gulf Cooperation Council (GCC) countries has reached five important findings. First, contemporaneously, no robust short run relationships are found in the data. Second, the international oil price increases tend to induce increased domestic oil consumptions in all member countries except in Oman. Third, three member countries, Bahrain, Kuwait and United Arab Emirates, are found to be oil conserving as their per capita GDP grow and expand; whereas, the other three countries, Oman, Qatar and Saudi Arabia, tend to drive up their domestic oil consumptions as their per capita GDP expand and grow. Fourth, the three oil-conserving countries also have higher income elasticity than the three non-oil conserving countries. Finally, the domestic oil markets are found to be immune to disturbances and shocks to the international oil prices. Therefore, in the face of rising oil prices, per capita oil consumptions are rapidly raising in the GCC countries, while they have taken downward trends in some developed countries such as the United States and Japan.

Keywords

• Income elasticity
• Oil consumption
• GCC