Does energy price affect energy efficiency? Cross-country panel evidence

In this paper, we analyze the relationship between energy intensity and energy price in a panel of 120 countries over 34 years, from 1980 to 2013. We use information on energy intensity and real oil price and merge it with macroeconomic data on the countries' structural characteristics. We assess their long-run relationship and direction of causality using panel cointegration tests and dynamic panel data models. We identify a statistically significant, but weak negative effect of real oil price on energy intensity, which corresponds to a positive effect of energy price on energy efficiency. We also show significant, large regional differences in this relationship. We thus posit that a global policy aimed at increasing the price of oil would induce a limited increase in average energy efficiency through a more efficient use of energy, but this increase would differ considerably across regions around the world.