Economic Growth and its Impact on Energy Consumption and Energy Intensity of Use

Abstract The purpose of this paper is to analyze the relationship between energy consumption and economic growth in Saudi Arabia and United Arab Emirates for the period 1990-2010. The paper will also assess the impacts of changes in energy prices on aggregate energy consumption, and finally, the paper will analyze the relationship between economic growth and oil intensity of use. We used time series data to provide estimates of elasticities. Empirical results showed: (1) The impact of income on energy consumption is positive, but with low elasticities. (2) The impacts of energy prices showed no significant effect on restraining total energy demand in both countries. (3) The effect of GDP on intensity of use for Saudi Arabia is positive indicating a high price or cost of converting energy into GDP while it is negative for United Arab Emirates, indicating a lower price or cost of converting energy into GDP. The paper concludes that United Arab Emirates is using its energy more efficiently compared to Saudi Arabia, which means that it uses less energy to perform the same task compared to Saudi Arabia, which implies that improving energy efficiency for Saudi Arabia is essential for more sustainable development in the future. JEL classification numbers: O