The Differential Effects of Oil Prices on the Development of Renewable Energy in Oil-Importing and Oil-Exporting Countries in Africa
Abstract
:1. Introduction
2. Literature Review
3. Methodology
3.1. Data Sources
3.2. Econometric Model
3.3. Econometric Technique: P-VECM Approach
4. Empirical Analysis
Robustness Checks
5. Discussion and Implications
6. Concluding Remarks
6.1. Contributions
6.2. Policy Recommendations
- Encouragement of investment in renewable energy: Policymakers in oil-importing countries should encourage the development of renewable energy by offering financial incentives, such as tax breaks, subsidies, or low-interest loans, to potential investors. This will help to make renewable energy more economically competitive, particularly when oil prices are high.
- Promotion of economic growth: Policymakers should implement policies that promote economic growth, such as infrastructure development and job creation, which will drive the growth of renewable energy. This can be achieved through public–private partnerships or government-led initiatives.
- Reduction of interest rates: Policymakers should reduce interest rates to encourage investment in renewable energy in net oil-importing countries. High-interest rates may discourage investors from pursuing renewable energy projects, particularly in the early stages, when returns on investment may be uncertain.
- Management of exchange rates: Policymakers should manage exchange rates carefully to promote the development of renewable energy in the oil-importing countries. This can be conducted through measures, such as currency stabilization funds, which can help to reduce volatility and make investment in renewable energy more predictable.
- Support of technology transfer: Policymakers should facilitate the transfer of renewable energy technology to net oil-importing countries to help them overcome technological barriers to the development of renewable energy. This can be conducted through partnerships with technology providers or through capacity-building programs.
6.3. Limitations and Future Research Directions
Author Contributions
Funding
Data Availability Statement
Conflicts of Interest
References
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Author (s) | Country/Area | Period | Method | Results |
---|---|---|---|---|
Wang et al. (2020) [19] | G-20 | 1990–2017 | Cointegration | Oil price plays a positive role in promoting renewable energy. |
Mukhtarov et al. (2020) [20] | Azerbaijan | 1992–2015 | STSM | A negative nexus exists between oil prices and REC. |
Chen et al. (2021) [28] | 97 countries | 1995–2015 | Panel threshold model | Increases in real oil prices lead to increased REC in less democratic countries but there are no significant effects in more democratic countries. |
Sahu et al. (2021) [26] | United States | 1970–2018 | NARDL | Increased oil prices lead to increased renewable energy in both the short and long term. |
Murshed and Taha (2021) [25] | 4 Asia net oil-importing economies | 1990–2018 | Cross-sectional dependency | Oil price fluctuations influence movements in REC and in total final energy consumption and aggregate production. |
Mukhtarov et al. (2021) [23] | Kazakhstan | 1992–2015 | FMOLS and CCR | Oil prices have negative effects on REC. |
Guo et al. (2021) [24] | G-7 Countries | 1980–2018 | NARDL | There is positive and negative nexus between oil price and REC (heterogeneity between the countries). |
Zhao and Wei (2021) [29] | China | 42 sectors in 2015 | CGE | Increasing oil prices can advance renewable energy investment. |
Lin and Wang (2022) [30] | China | GMM | Oil price uncertainty will increase the market’s expectation of renewable enterprises and, thus, stimulate their investment. | |
Rasheed et al. (2022) [21] | 30 European countries | 1997–2017 | FMOLS and the Driscoll–Kraay regression tests | Rise in oil prices increases the usage of renewable energy. |
Royal et al. (2022) [31] | G 7 Countries | 1971–2019 | FMOLS and DOLS | Oil prices are one of the major drivers of REC in the long run. |
Mukhatarov et al. (2022) [11] | Iran | 1980–2019 | GETS | Oil prices have a significant and negative impact on REC. |
Escoffier et al. (2022) [32] | OECD and BRICS | 1997–2016 | PSTR model | Higher oil prices increase investment in renewable energy. |
Husaini and Lean (2022) [33] | 8 Asian countries | 1980–2017 | Panel threshold regression | High oil prices increase public electricity generation. |
Zaghdoudi et al. (2023) [34] | China | 1970–2019 | NARDL | Oil price fluctuations have significant effects on REC. |
Kazemzadeh et al. (2023) [35] | 49 countries worldwide | 1985–2017 | Club convergence and PVAR | A granger causal relationship exists between GDP, REC, and oil price. |
Deka et al. (2023) [36] | Brazil, China, Indonesia, India, Mexico, Rusia and Turkey | 1990–2019 | ARDL | GDP, interest rates, and renewable energy promote exchange rate appreciation. |
Murshed (2023) [37] | 74 developing countries | 2000–2018 | DCCE-MG | Oil prices hike undermining macroeconomic factors and renewable electrification rate. |
Olanipekun et al. (2023) [22] | Global analysis | 2004–2019 | Wavelet-coherence and quantile regression | Renewable energy use leads to a significant fall in geopolitical oil prices. |
Tambari and Failler (2020) [38] | 6 African countries | 1990–2018 | VAR | Oil price has positive impact on investment in renewable energy. |
Ali (2022) [39] | South Africa | 1990–2019 | ARDL and NARDL | Negative shocks in oil prices increase demands for RE. |
Variable | Variable Description | Unit of Measurement | Expected Sign According to Economic Theory | Source of Data |
---|---|---|---|---|
Renewable energy generation | Renewable energy total generation from hydroelectricity, solar, wind, biomass and waste, hydroelectric pumped storage, non-hydroelectric renewables, geothermal, tides, and waves. | Per capita billions of kilowatt hours. | U.S. Energy Information Administration. http://www.eia.doe.gov/fuelrenewable.html (accessed on 15 March 2023) | |
Oil prices | The nominal oil price series is the petroleum (Dubai, Brent, Nigerian, and West Texas Intermediate) average crude prices. | The real oil price is calculated from the nominal oil price which is deflated by the inherent consumer price index of the individual countries. USA dollars per barrel. | Positive/negative | The nominal oil price data is taken from the British Petroleum (BP) annual statistical review (1985, 1990, 1996, 2001, 2007, 2012, 2018, and 2022) report and the individual country consumer price index from the International Monetary Fund’s International Energy Agency, International Financial Statistics (IFS). |
Per capita GDP | The real gross domestic product series is divided by population. | units: per caita US dollars at constant 2015 price; scale: billions. | positive | The United Nations economic database. http://unstats.un.org/unsd/snaama/Introduction.asp (accessed on 15 March 2023) |
Interest rate | The real interest is defined as the lending interest rate adjusted for inflation. | Measured as a percentage by the GDP deflator. | negative | World Bank Development Indicator, and the IFS. |
Exchange rate | International Monetary Fund exchange rate. | USD exchange rate against national currencies. | negative | The United Nations economic database. http://unstats.un.org/unsd/snaama/Introduction.asp (accessed on 15 March 2023) |
(a) Group Descriptive Statistics (1990–2021) | |||||
---|---|---|---|---|---|
REI | OP | GDPC | INTR | EXCH | |
Net oil-importing countries | |||||
Mean | 1.66 × 10−7 | 0.635 | 1585.957 | 8.827 | 145.510 |
Median | 1.15 × 10−7 | 0.642 | 575.110 | 8.369 | 21.218 |
Maximum | 7.50 × 10−7 | 2.660 | 6259.064 | 29.583 | 1989.391 |
Minimum | 3.43 × 10−9 | 0.107 | 203.864 | −17.122 | 2.39 × 10−9 |
Std. Dev. | 1.91 × 10−7 | 0.329 | 1956.954 | 12.483 | 354.583 |
Net oil-exporting countries | |||||
Mean | 8.30 × 10−8 | 11,743,685.000 | 3618.246 | −2.828 | 74.097 |
Median | 5.42 × 10−8 | 0.708 | 3153.474 | 1.606 | 39.294 |
Maximum | 3.40 × 10−7 | 1.04 × 109 | 13,263.490 | 38.978 | 631.442 |
Minimum | 9.24 × 10−10 | 0.109 | 1433.522 | −93.513 | 2.99 × 10−8 |
Std. Dev. | 7.99 × 10−8 | 96,861,240.000 | 2026.834 | 22.992 | 103.631 |
(b) The Average Values of Each Variable for the 10 Countries (1990–2021) | |||||
REI | OP | GDPC | INTR | Exch | |
Net oil-importing countries | |||||
Congo | 1.21 × 10−7 | 0.530 | 461.678 | 22.994 | 603.667 |
Ethiopia | 5.64 × 10−8 | 0.629 | 402.027 | −5.735 | 13.451 |
Kenya | 1.38 × 10−7 | 0.777 | 1306.227 | 7.956 | 74.808 |
Mozambique | 4.44 × 10−7 | 0.663 | 406.894 | 13.809 | 27.521 |
South Africa | 6.91 × 10−8 | 0.575 | 5352.960 | 5.111 | 8.101 |
Net oil-exporting countries | |||||
Algeria | 9.18 × 10−9 | 0.582 | 3579.938 | 0.747 | 72.839 |
Angola | 1.35 × 10−7 | 51,378,620.000 | 3172.026 | −21.229 | 105.908 |
Egypt | 1.74 × 10−7 | 0.618 | 3580.606 | 3.826 | 6.776 |
Libya | 1.20 × 10−9 | 0.453 | 10,624.700 | −1.843 | 1.069 |
Nigeria | 4.48 × 10−8 | 1.379 | 2008.383 | 3.138 | 138.052 |
Net Oil-Importing Countries | ||||
---|---|---|---|---|
LLC | IPS | |||
Level | First Difference | Level | First Difference | |
log_rei | −1.224 * | −8.766 *** | −1.727 ** | −7.480 *** |
log_op | −0.628 | −3.462 *** | −0.378 | −8.079 *** |
log_gdpc | −0.654 | −8.297 *** | −1.472 * | −9.501 *** |
Intr | −4.031 *** | −9.408 *** | −3.522 *** | −8.012 *** |
Exch | −0.139 | −8.455 *** | −0.940 | −9.247 *** |
Net oil-exporting countries | ||||
log_rei | −1.395 * | −3.621 *** | −1.391 * | −8.630 *** |
log_op | −0.266 | −8.710 *** | −0.284 | −6.035 *** |
log_gdpc | −0.125 | −3.269 *** | −0.806 | −8.514 *** |
Intr | −3.900 *** | −6.401 *** | −3.990 *** | −7.352 *** |
Exch | −0.528 | −7.811 *** | −0.672 | −9.348 *** |
Net Oil-Importing Countries | Net Oil-Exporting Countries | ||||
---|---|---|---|---|---|
Statistic | Weighted Statistic | Statistic | Weighted Statistic | ||
within-dimension | Panel v-Statistic | −1.011 | −1.797 | −2.150 | −2.322 |
Panel rho-Statistic | −4.753 *** | −4.528 *** | −2.696 *** | −1.038 | |
Panel PP-Statistic | −12.784 *** | −10.257 *** | −14.366 *** | −7.271 *** | |
Panel ADF-Statistic | −3.192 *** | −3.589 *** | −6.975 *** | −3.588 *** | |
between-dimension | Group rho-Statistic | −2.740 *** | −0.698 | ||
Group PP-Statistic | −10.726 *** | −12.288 *** | |||
Group ADF-Statistic | −3.429 *** | −4.386 *** |
Net Oil-Exporting Countries | ||||||
---|---|---|---|---|---|---|
Lag | LogL | LR | FPE | AIC | SC | HQ |
0 | −732.110 | NA | 5.400 | 26.742 | 26.872 | 26.795 |
1 | −722.059 | 1146.894 | 2.087 * | 14.802 * | 15.822 * | 15.357 * |
2 | −695.700 | 46.921 | 2.291 | 15.014 | 16.447 | 15.594 |
3 | −674.321 | 35.916 | 2.487 | 15.086 | 17.171 | 15.930 |
Net Oil-Importing Countries | ||||||
Lag | LogL | LR | FPE | AIC | SC | HQ |
0 | −780.766 | NA | 2.215 | 29.763 | 29.879 | 29.810 |
1 | −773.814 | 1913.209 | 0.420 * | 13.397 | 14.093 * | 13.679 * |
2 | −751.822 | 39.953 | 0.477 | 13.447 | 14.725 | 13.966 |
3 | −718.858 | 57.138 | 0.509 | 13.314 * | 15.173 | 14.069 |
Net Oil-Importing Countries | Net Oil-Exporting Countries | |||
---|---|---|---|---|
Estimates | Std. Error | Estimates | Std. Error | |
dlog_rei(−1) | 0.181 ** | 0.081 | 0.256 *** | 0.084 |
dlog_op(−1) | 0.203 * | 0.114 | −0.058 | 0.065 |
dlog_gdpc(−1) | 1.393 * | 0.710 | 0.044 * | 0.025 |
d_intr(−1) | −0.057 * | 0.004 | 0.003 * | 0.002 |
d_exch(−1) | −0.015 ** | 0.007 | 0.056 *** | 0.010 |
c | 0.080 *** | 0.032 | 0.064 ** | 0.032 |
ECM | −0.019 *** | 0.005 | −0.043 *** | 0.009 |
Adjusted R-squared | 0.858 | 0.774 | ||
F-statistic | 147.878 *** | 172.211 *** | ||
VEC Residual Serial Correlation LM Tests | 69.521 [0.532] | 77.098 [0.309] | ||
VEC Residual Heteroskedasticity Tests | 117.290 [0.551] | 426.387 [0.226} |
(a) Net Oil-Importing Countries | ||||||
---|---|---|---|---|---|---|
Period | S.E. | LOG_REI | LOG_OP | LOG_GDPC | INTR | EXCH |
1 | 0.349 | 100.000 | 0.000 | 0.000 | 0.000 | 0.000 |
5 | 0.699 | 96.352 | 0.219 | 3.148 | 0.064 | 0.217 |
10 | 0.979 | 95.186 | 0.309 | 4.193 | 0.038 | 0.275 |
15 | 1.195 | 94.746 | 0.354 | 4.576 | 0.032 | 0.293 |
20 | 1.378 | 94.512 | 0.381 | 4.775 | 0.030 | 0.303 |
(b) Net Oil-Exporting Countries | ||||||
Period | S.E. | LOG_REI | LOG_OP | LOG_GDPC | INTR | EXCH |
1 | 0.305 | 100.000 | 0.000 | 0.000 | 0.000 | 0.000 |
5 | 0.568 | 98.984 | 0.211 | 0.006 | 0.703 | 0.096 |
10 | 0.785 | 98.796 | 0.150 | 0.009 | 0.937 | 0.108 |
15 | 0.954 | 98.698 | 0.116 | 0.010 | 1.061 | 0.114 |
20 | 1.098 | 98.637 | 0.096 | 0.011 | 1.138 | 0.118 |
Net Oil-Importing Countries | Net Oil-Exporting Countries | |
---|---|---|
Log-rei | 0.395 *** (0.018) | 0.482 *** (0.012) |
Log_op | 0.015 *** (0.004) | 0.018 (0.014) |
Log_gdpc | 0.058 ** (0.027) | 0.079 ** (0.038) |
Intr | −0.023 * (0.012) | 0.003 (0.002) |
Exch | −0.059 *** (0.018) | 0.092 *** (0.027) |
C | −0.261 *** (0.015) | 0.182 *** (0.017) |
Arellano–Bond test for AR(1) | −1.664 [0.095] | −1.116 [0.262] |
Arellano–Bond test for AR(2) | −0.565 [0.573] | −0.482 [0.631] |
Hansen J-test | 27.793 [0.248] | 30.187 [0.159] |
Net Oil-Importing Countries | |||||
---|---|---|---|---|---|
Congo | Ethiopia | Kenya | Mozambique | South Africa | |
dlog_rei(−1) | 0.511 *** | 0.245 *** | 0.190 *** | 0.428 *** | 0.382 *** |
dlog_op(−1) | 0.092 ** | 0.082 ** | 0.038 * | 0.087 ** | 0.093 ** |
dlog_gdpc(−1) | 0.088 ** | 0.079 ** | 0.012 * | 0.019 * | 0.065 ** |
d_intr(−1) | −0.043 | −0.074 ** | −0.045 * | 0.004 | −0.021 * |
d_exch(−1) | −0.013 * | −0.068 ** | −0.077 ** | −0.053 *** | −0.064 ** |
c | −0.418 *** | −0.396 * | 0.878 *** | 0.739 ** | 0.277 * |
Ecm | −0.081 *** | −0.029 *** | −0.007 * | −0.036 ** | −0.096 *** |
Adjusted R-squared | 0.836 | 0.763 | 0.962 | 0.868 | 0.794 |
F-statistic | 142.995 *** | 256.793 *** | 377.808 *** | 175.973 *** | 278.161 *** |
Net Oil-Exporting Countries | |||||
Algeria | Angola | Egypt | Libya | Nigeria | |
dlog_rei(−1) | 0.855 *** | 0.130 *** | 0.224 *** | 0.212 *** | 0.663 *** |
dlog_op(−1) | −0.032 | 0.076 *** | −0.070 | −0.056 | −0.025 |
dlog_gdpc(−1) | 0.039 * | 0.044 * | 0.006 * | 0.029 * | 0.058 * |
d_intr(−1) | 0.004 | 0.013 * | 0.008 * | 0.016 * | 0.024 * |
d_exch(−1) | 0.055 ** | −0.021 * | 0.033 * | 0.072 *** | 0.049 * |
c | 0.965 *** | 0.769 ** | 0.972 *** | 0.650 ** | 0.704 ** |
Ecm | −0.078 *** | −0.047 ** | −0.059 *** | −0.038 * | −0.024 * |
Adjusted R-squared | 0.764 | 0.922 | 0.735 | 0.863 | 0.895 |
F-statistic | 278.161 *** | 108.548 *** | 176.044 *** | 324.915 *** | 385.711 *** |
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Tambari, I.J.T.; Failler, P.; Jaffry, S. The Differential Effects of Oil Prices on the Development of Renewable Energy in Oil-Importing and Oil-Exporting Countries in Africa. Energies 2023, 16, 3803. https://doi.org/10.3390/en16093803
Tambari IJT, Failler P, Jaffry S. The Differential Effects of Oil Prices on the Development of Renewable Energy in Oil-Importing and Oil-Exporting Countries in Africa. Energies. 2023; 16(9):3803. https://doi.org/10.3390/en16093803
Chicago/Turabian StyleTambari, Ishaya Jonah Tegina, Pierre Failler, and Shabbar Jaffry. 2023. "The Differential Effects of Oil Prices on the Development of Renewable Energy in Oil-Importing and Oil-Exporting Countries in Africa" Energies 16, no. 9: 3803. https://doi.org/10.3390/en16093803