Evolving a policy framework discovering the dynamic association between determinants of oil consumption in India

Abstract

By addressing the sustainable development goal (SDG) of cleaner and affordable energy, developing countries like India can navigate the growing environmental pollution. However, viewing the dominating share of oil in the country’s energy basket, it will be challenging for policymakers to reduce its consumption in the coming years. In this vein, this study aims to identify the determinants of oil consumption in India to develop a future strategy to reduce oil dependency. In furtherance of this goal, we included four determinants of oil, i.e., remittances, exchange rates, government consumption, and technological innovation. The results obtained using the nonlinear autoregressive distributed lag method revealed that the increased remittances inflows had increased oil consumption during the study period (1980–2017). The impact of increased and decreased government consumption on oil demand is found positive and negative, respectively. Further, it is expected that we can reduce oil usage by introducing advanced technology across sectors. But the computed results revealed that the increased technological innovation led to an increase in oil demand, whereas downside variation in technology had reduced its consumption in the long run. In the end, the study proposes a policy framework that supports SDG7, SDG 9, SDG 12, and SDG 13.