Demand for Imported Crude Oil in Pakistan: NARDL Framework

International Journal of Economics and Management Studies
© 2018 by SSRG - IJEMS Journal
Volume 5 Issue 9
Year of Publication : 2018
Authors : Nazia Tabasam, NorwazWana Ismail, Gul Andaman, Shabbir Ahmad, and Saira Akhtar
How to Cite?

Nazia Tabasam, NorwazWana Ismail, Gul Andaman, Shabbir Ahmad, and Saira Akhtar, "Demand for Imported Crude Oil in Pakistan: NARDL Framework," SSRG International Journal of Economics and Management Studies, vol. 5,  no. 9, pp. ):9-16, 2018. Crossref,


This research article analyzes the long run relationship between real GDP growth rate and demand for imported crude oil in Pakistan assuming asymmetries. Annual time series data for quantity of imported crude oil, real GDP growth rate and price of imported crude oil are used from 1970 to 2014. Using Nonlinear Autoregressive Distributed Lag (NARDL) Model, the variables are found to be cointegrated. As theory predicts, demand for imported crude oil is relatively in-elastic and negatively related to its price. There is no evidence of non-linear or asymmetrical relationship between real GDP growth rate and demand for imported crude oil in the long run. However, dis-aggregation shows that negative changes in real GDP growth rate lead to a rise in the demand for imported crude oil while positive changes have no significant effect. The results suggest that even though local crude oil production is increasing, there is still a growing dependence on imported crude oil and thus, it is important to invest in local and alternative energy resources to revive the crumbling energy sector in Pakistan.


Energy demand, imported crude oil, Non-Linear Autoregressive Distributed Lags (NARDL), Pakistan economy


[1] Bentzen, J., and T. Engsted. 2001. “A revival of the autoregressive distributed lag model in estimating energy demand relationships.” Journal of Energy 26: 45–55. 
[2] Christopoulos, D. K. 2000. “The demand for energy in Greek manufacturing.” Energy Economics 22: 569-586. 
[3] Alves, D. C. O., and R. D. L. S. Bueno. 2003. “Short-run, long-run and cross elasticities of gasoline demand in Brazil.” Energy Economics 25: 191–199. 
[4] Storchmann, K. 2005. “Long-Run Gasoline demand for passenger cars: the role of income distribution.” Energy Economics 27: 25–58. 
[5] Cooper, J. 2003. “Price Elasticity of Demand for Crude Oil. Estimates for 23 Countries.” OPEC Review 27 (1): 1-8.
[6] Altinay, G. 2007. “Short-run and long-run elasticities of import demand for crude oil in Turkey.” Energy Policy 35: 5829–5835. 
[7] Ghosh, S. 2009. “Import demand of crude oil and economic growth: Evidence from India.” Energy Policy 37: 699–702. 
[8] Gately, D., and H. G. Huntington. 2002. “The asymmetric effects of changes in price and income on energy and oil demand.” The Energy Journal 23: 19–55. 
[9] Semboja, H. H. 1994. “The Effects of Energy Taxes on the Kenyan Economy.” Energy Economics 3: 205-215. 
[10] Narayan, P. K., and R. Smyth. 2007. “A panel cointegration analysis of the demand for oil in the Middle East.” Energy Policy 35 (12): 6258-6265. 
[11] Xiong, J., and P. Wu. 2009. “An Analysis of Forecasting Model of Crude Oil Demand Based on Cointegration and Vector Error Correction Model.” Paper presented in 2008 International Seminar on Business and Information Management, ISBIM 2008: 485-488 
[12] Ziramba, E. 2010. “Price and Income Elasticities of Crude Oil Import Demand in South Africa." A Cointegration Analysis.” Energy Policy 38 (12): 7844-7849. 
[13] Tsirimokos, C. 2011. “Price and Income Elasticities of Crude Oil Demand. A Case of Ten IEA Countries.” Master diss., Swedish University of Agricultural Sciences. 
[14] Stambuli, B. B. 2013. “Price and income elasticities of oil Demand in Tanzania: an autoregressive approach.” Business Management Dynamics 3 (1): 75-83 
[15] Siddiqui, R., and R. Haq. 1999. “Demand for Energy and the Revenue Impact of Changes in Energy Prices.” Pakistan Institute of Development Economics, Research Report No. 174. 
[16] Aqeel, A., and M. S. Butt. 2001. “The Relationship between Energy Consumption and Economic Growth in Pakistan.” Asia-Pacific Development Journal 8 (2): 101–109. 
[17] Arshad, K., and U. Ahmad. 2008. “Energy Demand in Pakistan: A Disaggregate Analysis.” The Pakistan Development Review 47 (4): 437–455. 
[18] Evans, J., and L. C. Hunt. 2009. “International handbook on the Economics of Energy.” Surrey Energy Economics Centre, University of Surrey, UK 
[19] Government of Pakistan. 2013-14. Economic Advisor‟s Wing, Finance Division, Ministry of Finance, Pakistan. 
[20] Shin, Y., B. Yu, and G. Matthew. 2011. “Modelling Asymmetric Cointegration and Dynamic Multipliers in an ARDL Framework.” 1–35. 
[21] Pesaran, H., Y. Shin, and R. Smith. 2001. “Bound testing approaches to the analysis of level relationships.” The Journal of Applied Econometrics 16: 289-326. 
[22] Narayan, P. K. 2005. “The saving and investment nexus for China: evidence from cointegration tests.” Applied Economics 37: 1979–1990. 
[23] Dees, S., P. Karadeloglou, R. K. Kaufmann, and M. Sanchez. 2007. “Modelling the world oil market: assessment of a quarterly econometric model.” Energy Policy 35: 178–195. 
[24] Yaprakli, S., and Kaplan, F. 2015. Re-Examining of the Turkish Crude Oil Import Demand with Multi-Structural Breaks Analysis in the Long Run Period (April 16, 2015). International Journal of Energy Economics and Policy, 2015, 5(2), 402-407. Available at SSRN: