The spatial impact of urbanization on energy consumption in selected OPEC countries

Nowadays, urbanization, which is closely related to economic development and industrialization, has become one of the driving forces of energy demand. The most prominent feature of urbanization is the physical growth of urban areas. This phenomenon has become an important social process in the 21st century, especially in many developing countries such as OPEC. The acceleration of urbanization leads to an increasing contradiction between economic growth and environmental development. The process of urbanization not only involves a large number of rural people moving to cities but also involves economic transformation and improvement of the industrial structure, which inevitably leads to the creation of urban infrastructures with large investments. Thus, it increases energy consumption (Liu and Peng, 2018). Although extensive research has been carried out on the relationship between urbanization and energy consumption, there are few studies about the OPEC countries.  Many studies have shown that urbanization can affect energy consumption or energy intensity through several channels. First, urban infrastructure must consume more energy through the expansion of economic activities. This is because urbanization leads to a shift from traditional agriculture with little energy consumption to industrial manufacturing with more consumption. Second, modern buildings need more energy (such as for air conditioners and elevators). Third, in cities, motor vehicles consume a large value of energy (Bloomi and Al-Shari, 2017).At the same time, new technologies (for example, energy-saving urban buildings, efficient household appliances, district heating systems, and energy-efficient transportation) reduce energy consumption in buildings and transportation in large cities.In addition, according to Tubler's law of geography, geographical locations are interdependent, and nearby places are more affected than distant places. So, according to the econometric literature, ignoring the space dimension in modeling causes errors in estimation and statistical inference (Seif and Hamidi Zari, 2017). In other words, although energy consumption varies among OPEC member countries, they may be spatially dependent due to geographical proximity, socio-economic interactions and common shocks, such as production technology and energy consumption patterns. This study examines the direct and indirect effects of urbanization on energy consumption.Since spatial interactions are the focus of this research and there are spatial interactions between urbanization and energy consumption, a simple econometric model cannot account for the impacts of spatial factors on energy consumption. Therefore, the research model is taken from the study of Sheng et al. (2018) and business variables, government expenditures and the space panel method are added to it.Urbanization may also affect energy consumption in suburban areas, which involves potential spatial (or indirect) effects of energy consumption on urban areas. The present study examines the effects of urbanization on energy consumption using random regression of effects on population, wealth and technology (STIRPAT) in a selection of OPEC member countries. In this regard, the space panel model and time series data during the period 1990-2020 have been used. The variables of trade, population, GDP, technology, total energy consumption and urbanization are extracted from the World Bank database. Based on the results of model estimation, the relationship between trade and energy consumption in OPEC member countries is negative and significant. Open trade allows developing economies to import advanced technologies from developed economies. The use of advanced technology reduces energy intensity. This process is called technical effect.Government spending also has a significant negative impact on energy consumption. Over the past decades, the allocation of energy subsidies has led to its excessive consumption in OPEC member countries. But recently, with increasing government spending and budget deficit problems, governments have adopted contractionary fiscal policies. The elimination of energy carrier subsidies is one of the plans to improve the budget, which has led to higher energy prices and lower demand.Industrialization has a positive and significant relationship with energy consumption in OPEC member countries. Given the role and importance of energy in the production of various industries, it can be said that energy has a very large share in industrialization. Industrial activities, such as high-tech production, consume more energy than agricultural production. According to the findings, with the long-term direct effects of industrialization variables, trade and economic growth have positive effects, whereas urbanization and government spending have negative effects on energy consumption. The results of indirect effects indicate the positive impacts of urbanization, trade and government spending and the negative impacts of industrialization and economic growth on energy consumption. The total effects of urbanization, industrialization and trade on energy consumption are positive, and economic growth and government spending have negative effects on energy consumption. Accordingly, it is suggested for in the OPEC member countries, to consider the effects of the spatial spillover of energy consumption to control it.