Determinants of Fuel Imports in Pakistan: The Role of Fossil Fuel Consumption, Renewable Energy and Economic Growth

Abstract

This study investigates the factors influencing fuel imports in Pakistan, focusing on renewable electricity output, foreign investments, fossil fuel consumption, growth rate, and per capita income, using time-series data from 1990Q1 to 2022Q4. Due to mixed stationarity levels identified by the Augmented Dickey-Fuller Test, the ARDL model was applied. Short-run results indicate that fuel imports are highly persistent. Renewable energy generation negatively impacts fuel imports, while fossil fuel consumption shows both positive immediate and negative lagged effects. Initially, fuel imports rise with increased renewable energy usage but eventually decline. Growth rate and per capita income also affect fuel imports with negative and positive coefficients, respectively. Long-term analysis reveals that fossil fuel consumption positively impacts fuel imports, whereas renewable electricity generation has a negative effect. Historical fossil fuel consumption reduces current fuel imports. Foreign investments were found to have negligible long-term effects. The study highlights the complex interplay between energy usage, economic factors, and fuel import trends in Pakistan. To reduce fuel imports, policymakers should enhance renewable electricity production and regulate renewable energy use, promote economic growth, and manage per capita income distribution to maintain stable import levels. Additionally, targeted strategies to minimize fossil fuel use and optimize foreign capital effectiveness are recommended.