Abstract:
The objective of this paper is to explain the impacts of changes in the oil price and the natural
gas price on economic growth in six countries namely Algeria, Iraq, Kuwait, Libya, Saudi
Arabia, and United Arab Emirates by encompassing a panel data analysis on the six countries
starting from 2001 till 2019. To reach our objective, the research examined the impact of some
independent variables namely employment in industry, employment in services, gross capital
formation, government expenditure, consumption expenditure in addition to our two focus
variables which are the price of oil, and price of natural gas on the dependent variable GDP in
the tested six countries. We also used data from the World Bank's World Development Indicators
to empirically validate our models. Moreover, the study estimated several econometric models
done through statistical program E-Views such as the common constant. The common constant
model with SUR weights showed that there is a negative relation between the dependent variable
GDP growth and each of consumption expenditure and employment in services. On the other
hand, the same model proved a positive relation between GDP growth and each of government
expenditure and the price of oil. Such results were confirmed by the ARDL long run findings
which showed that there is a negative relation between the dependent variable GDP growth and
the same two variables, but added an additional factor which is the price of natural gas as a factor
which negatively impacts GDP. On the other hand, the same model added the price of oil as an
important positive influencer to GDP, besides government expenditure and gross capital
formation. Lastly, according to the results, we suggest that OPEC countries take advantage of
any increase in oil prices to foster more economic growth. Even though the impact of natural gas
price increases on economic growth is negative in long run, yet in the short term, increases in the
price of natural gas had a positive effect on GDP growth in the six countries, with the impact
being the highest in Algeria. Accordingly, rises in natural gas price may temporarily enhance
GDP growth in the short run.
