The economic impact of phasing out energy consumption subsidies in GCC countries

This paper investigates the impact of phasing out energy consumption subsidies on the Gulf Cooperation Council (GCC) economies using causality analysis between GDP and energy consumption. The included empirical tests reveal strong support to the feedback hypothesis between the two variables for Qatar and Saudi Arabia, beyond the sample period. The same tests support the conservation hypothesis for Bahrain and Kuwait within and beyond the sample period, respectively. Furthermore, the growth hypothesis is supported for Oman beyond the sample period. Finally, the analysis of GDP-Energy causality relationship in the UAE supports the neutrality hypothesis. These results suggest that appropriate energy policies geared at phasing out subsidies, hence inducing a more efficient use of energy in this region, should be studied carefully and implemented with caution as the impacts of these policies are expected to differ among individual countries in the region.