The relationship between energy consumption and economical growth

An indispensable input for production process and a necessary means inincreasing welfare of societies, energy is a primary element of economic andsocial development. Given the diminishing trend of traditional sources ofenergy, an uptrend of energy prices and rise of environmental problems dueto energy overuse, energy planning becomes more of a useful, evenmandatory means especially for countries suffering from scarcity of sourcesof energy, dependent on importation with lack of foreign currency.Like other developing fellows, Turkey is also an energy intensive growingeconomy and she meets most of required energy by importation. Overallannual rate of increase in energy use is 5 percent. 92 percent of totalconsumed petroleum, wich makes 37 percent of total energy consumption, isimported. Thus, Turkey faces restraints both from supply side and demandmanagement policies in meeting its increasing energy need.Notwithstandingly, a close look is required to the causality relationshipbetween energy consumption and aggregate economic activities whileevaluating such policies. In this study, after reviewing general nature of theenergy industry in Turkish context and worldwide scale under categories ofproduction, consumption and reserves, the relationship between energyconsumption and economic growth is elaborated using Granger CausalityTests.It is observed that economic growth stimulates an increase in total energyuse and remarkable rise in oil consumption. On the other hand, no causalitywas found between economic growth and use of natural gas and coal.Another significant outcome of this study is related to electricity consumption,which is determined to increase economic growth within 10 percent level ofmeaningfulness, while economic growth rises the former within 10 percentlevel of meaningfulness.