The Role of the Petrochemical Sector's Exports in the Diversification of the Saudi Economy. A Scenario Analysis of the Foreign and Domestic Price Shocks

Fakhri J. Hasanov, Muhammad Javid and Heyran Aliyeva

The Energy Journal, 2024, vol. 45, issue 1_suppl, 195-213

Abstract: Saudi Arabia's petrochemical sector accounts for a significant portion of non-oil exports and has the potential to contribute significantly to the Kingdom's diversification. In this study, Autometrics —a machine learning method, was first employed to estimate export equations of chemicals and rubber-plastics for 1993-2020. The estimated equations were then integrated into a macroeconometric model called KAPSARC Global Energy Macroeconometric Model (KGEMM) and a scenario analysis was performed for the diversification effects of foreign and domestic price shocks till 2035. The scenario analysis showed that a 10% increase in foreign prices leads to 0.40 percentage point and 0.13 percentage point more diversified exports and economy on average for 2023-2035. Regarding domestic prices, a 19% increase in industrial fossil fuel prices and a 10% increase in ethane price result in less than a 0.1 percentage point contraction in the diversification of exports and economy if the revenues from the price reforms are not recycled back to the economy. The reforms can boost economic diversification by 0.05 percentage point if the revenues are recycled back to the petrochemical sector as an investment. If domestic price reforms are coupled with the investment in the petrochemical sector and 50% of this investment goods are locally produced, then diversification of Saudi export and economy enlarge considerably—by 0.20 percentage point and 0.26 percentage point, respectively.

Keywords: Saudi Arabia; Chemicals exports; Rubber-plastics exports; Petrochemical; Localization; Autometrics; KGEMM (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.45.SI1.fhas (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:45:y:2024:i:1_suppl:p:195-213

DOI: 10.5547/01956574.45.SI1.fhas

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().