Energy Consumption in Iran: Past Trends and Future Directions

Energy is one of the most significant presented factors in economic literature. Today, the consumption and efficiency of ener gy have affected all the economical and industrial activities. Our world is the world of economical and industrial development and the process of this development has even been accelerated through the recent decades. Considering the especial situation of I ran in the world and in the region as well, energy sector is more important in this country. The energy of Iran, as one of the most powerful import-export energy of the world, is very potent in the world economy. While Iran is benefited from energy exportation, it can also affect the economy of importer countries. Energy resources in Iran consist of the third largest oil reserves and the second largest natural gas reserves in the world. Iran is in a constant battle to use its energy resources more effec tively in the face of subsidization and the need for technological advances in energy exploration and production. The energy consumption in the country is extraordinarily higher than international standards. Iran recycles 28 percent of its used oil and gas where as the figure for certain countries stands at 60 percent. With an economy which is expected to maintain a rate of growth of 2 to 5 per cent for decades, Iran's role in the world energy market becomes increasingly influential. This makes it important to predict Iran's future demand and supply for energy. The objective of this paper is to apply the Bayesian vector autoregressive methodology to forecast Iran's energy consumption and to discuss potential implications. The slower growth reflects an expect ed slower economic growth and the decline in energy consumption due to structural changes in the Iran economy. Iran's dwindling crude oil production will also put pressure on the internal use of refined products, as consumption and exports come to vie f or the same barrel.