Energy Consumption, Price, and Value Added of the Industry Sector in Iran

Abstract

Energy has constantly been one of the most important economic issues of each country. Production and, consumption of energy have constantly been playing a significant role in various aspects of economy. Industry is a major part and consumer of energy, and of course industrialized countries have inviolate the great shareholder in energy consumption in the world. Awareness of the consumption of energy in industry has many applications. This is due to the fact that factors dependent on the consumption of energy are somehow well- known and hence decision making about them would be done easier. Production is a function of some factors, which definitely includes energy as one of its factors. Therefore, a Vector Auto regressive (VAR) procedure is used. These components are natural gas, oil products, coal, gasoline and their prices. The time period of this study is the annual data of 1967-2017, the structure of applied variables in equations is separately investigated. There is a weak relationship between industry value added and price and energy consumption. Energy consumption growth does not have proportional relationship with production growth. The low price of energy is one reason for energy deprivation in Iran. Calculated price elasticity indicates that relationship between price and industry value added could be in a negative level.