Socioeconomic factors of investment-induced petroleum consumption

What is it about?

Capital investment stimulates a sizable portion of petroleum consumption, especially in emerging economies. However, investment-embedded petroleum consumption (IEPC) and the socioeconomic factors that influence it are not well studied. Our study's objective is to close this research gap. Our article estimates the effects of petroleum intensity, technology, investment structure, and economic development on China's IEPC using input-output and bipolar structural decomposition analysis (SDA). Additionally, our article develops a previously mostly unknown index of investment intensity.

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Photo by Zbynek Burival on Unsplash

Photo by Zbynek Burival on Unsplash

Why is it important?

Our research can help reduce petroleum demand by estimating the IEPC of the world's second-largest petroleum consumer. Given the current insufficient local deposits to meet consumption, the high investment ratio in Chinese GDP, and China's leading position as both a producer and consumer of global carbon emissions, this has significant economic, political, and environmental benefits. Aside from China, our work indicating the key factors of IEPC can be beneficial in general for other Asian, African, and Latin American developing economies, particularly large oil importers such as India, South Africa, and Mexico, to effectively plan environmentally conscious fixed investments. This, in turn, can provide both economic and environmental benefits by reducing reliance on imported petroleum (i.e., decreasing trade deficit) and greening future investments in fixed assets.

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