Political instability, oil price shocks, energy crisis and income inequality in Pakistan

• Main Author: Hussain, Jibran
• Format: Thesis
• Language: English; English
• Published: 2020
• Subjects: HB Economic Theory
• Online Access: https://etd.uum.edu.my/10350/1/permission%20to%20deposit-grant%20the%20permission-902641.pdf; https://etd.uum.edu.my/10350/2/s902641_01.pdf; https://etd.uum.edu.my/10350/

Pakistan has an energy deficient economy with unstable political and governance systems. This unstable system and prevalent ad-hoc practices have incapacitated the energy sector in multifarious aspects such as weakening the energy infrastructure, maintaining an irrational energy mix, and compounding circular debt. As a result, the country remains under persistent energy deficiency and is subjected to asymmetries and shocks of oil prices, which are contributing factors to ongoing socioeconomic disparities. The objective of this study is to investigate the direct and indirect effects of political instability on the energy crisis, to determine the asymmetric role and shocks of oil prices in causing the energy crisis, and to investigate the impact of the energy crisis on income inequality. The linear and nonlinear Autoregressive Distributed Lag and Dynamic Ordinary Least Squares, for the time series data from 1971 to 2016, are employed in the empirical analysis. The results show that the improvement in political stability and asymmetric negative oil prices have decreased the energy crisis, whereas the political instability, positive oil prices, and oil price shocks have deteriorated the energy crisis. The increasing energy crisis escalates income inequality. Sustainability in the regime, as well as policy switching, is a necessary condition for political and government stability. Stable energy governance is essential in reducing energy crisis. In addition, a drastic policy shift from import dependency to an optimal indigenous energy mix, such as hydro, coal, nuclear and gas is mandatory to mitigate the impact of asymmetries of oil prices and shocks. Finally, the sustainable energy policy for ensuring the affordable energy supply to the lower and middle-income groups is necessary to reduce income inequalities.