KAPSARC – Elasticity of Energy Substitution in Saudi Arabia’s Industrial Sector

The main theme of the document is the study of the elasticity of substitution of various types of energy in the industrial sector of Saudi Arabia.

Key findings include: own price elasticities for fuel oil, natural gas, diesel fuel, and electricity are negative, which is consistent with economic theory. The demand for natural gas, electricity, and diesel fuel is inelastic, while the elasticity for fuel oil is close to unity. Fuel oil, natural gas, and electricity are relatively strong substitutes in Saudi Arabia's industry, with substitution elasticities being positive and exceeding 1. Natural gas and electricity are moderate substitutes for diesel, with substitution elasticities being positive but less than 1. The strong substitutability of cleaner energy sources for petroleum products suggests the possibility...