Energy efficiency in OPEC member countries: analysis of historical trends through the energy coefficient approach

• DOI: http://doi.org/10.1111/opec.12041
• Author: Jorge León,Yazeed Al‐Rashed
• Published date: 01 March 2015
• Date: 01 March 2015

Energy efficiency in OPEC member

countries: analysis of historical trends

through the energy coefficient approach

Yazeed Al-Rashed* and Jorge León**

*Senior Research Analyst, King Abdullah Petroleum Studies and Research Center, Bldg 106, P.O.

Box 88550, Riyadh 11672, Saudi Arabia. Email: yazeedalrashed@gmail.com, yazeed.alrashed@kapsarc.org

**Energy Demand Analyst, OPEC Energy Studies Department, Helferstorferstrasse 17, 1010 Vienna,

Austria. Email: jleon@opec.org

Abstract

Period-wise energy coefficientsfor members of the Organization of the Petroleum Exporting Coun-

tries (OPEC) were calculated, showing diverse behaviour among them. Behaviour of aggregate

OPEC coefficients reflects the general trend among its member nations. Acceleration of transporta-

tion fuel demand fuelled high intensities in the mid-1970s. An overall economic downturn in the

1980s did not dampen demand growth, but in fact accelerated in the industrial and household,public

and commercial (HPC) sectors, thus keeping energy coefficients above1. Energy coefficients were

headed towardsunity in the 1990s, before finally settling under 1 in the 2000s. Wecaution from inter-

preting these developments as improvements in efficiency, as OPEC member countries have not

become ‘post-industrial’ as more value-added industries, infrastructure development and stability

encourage consumption. Electricity coefficients can be used as a proxy for consumer behavioural

efficiency,as the HPC sector is its largest consumer.After the 1990s, almost all OPEC member coun-

tries had higher electricity coefficients than energy ones, due to reasons spanning from higher

urbanisation and population growth rates, to low electricity prices.This suggests that electricity use

in the industrial and HPC sectors will be a major driver of future demand growthfor those countries,

especially as their service sector grows and their economies diversify.

1. Introduction

1.1. Objectives

This study aims to analyse the trends of energy efficiency in members of the Organization

of the Petroleum Exporting Countries (OPEC) from a different perspective by using the

energy coefficient, an alternative measure superior to the widely used ‘energy intensity’.

In addition, a better understanding of energy efficiency drivers can be reached by

This research was undertaken as part of Yazeed Al-Rashed’s summer fellowship at OPEC under

the supervision of Dr. Jorge León prior to his incorporation to KAPSARC.

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sector-wise separation of intensity effects (i.e. transportation, residential or industrial).

Results of such an analysis wouldg reatlyhelp policy makers tailor measures to target spe-

cific sectors while taking into account the macroeconomic efficiency effectsof industriali-

sation, to effectively implement them for optimum results.

The paper also offers a brief summary of the methods used in the analysis without

delving into arithmetic details into their derivation. Illustrative examples and analysis

of OPEC data are designed to give policy makers insight into the intuitiveness of the

methods used.

1.2. Background

1.2.1. Measures of energy efficiency

From a technical standpoint, a diverse range of energy efficiency definitions exist.They

are mostly thermodynamic or power related, relating an output of energy with an input of

another form of energy.For example, conventional thermal power plant efficiencies relate

the power generated by turbines to the heat content of the fuel, which is effectively the

amount of fuel used.

Policy makers and economists, however, are more concerned about the economic—

and not necessarily monetary—effects of such consumption. Hence, alternate indicators

of energy performance must be defined, ones that relate an input of energy to an output of

monetary, economic or urban activityat different aggregation levels.

The most commonly used measure of energy efficiency is the energy-gross domestic

product (GDP) ratio, or energy intensity. Conceptually, energy intensity represents the

inverse of the common understanding of efficiency; higher energy intensity represents

more energy consumed to generate one unit of GDP, which generally represents undesir-

able economic ‘inefficiency’. Hence, a more energy-efficient economy is less energy

intensive.

Energy intensity represents the highest level of aggregation among indicators. It is an

economy-wide indicator that does not differentiate between sectors. It is not always pos-

sible to use the same activity indicator across all sectors of the economy (GDP maybe an

adequate indicator for industry but not for transportation). Hence, the use of energy inten-

sity is widespread due to the ease of calculation, availability of data and applicability to

cross-country comparisons.

Energy intensity time series haveshown common trends among countries with similar

characteristics. For example, industrialisation—represented by the replacement of agri-

culture with manufacturing—is often associated with increasing energy intensities. Post-

industrialisation, the share of industry in GDP declines as the service sector grows; hence,

energy intensities tend to decrease. The most popular representation of these effects is in

the Kuznets curve (Ang, 2006; Ang and Liu, 2006).

Yazeed Al-Rashed and Jorge León78

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