The effect of sectoral natural gas consumption on economic growth: a study of Turkey

Turkey, which is among the developing countries, is highly dependent on foreign energy. This dependency creates a great burden on the country’s economy. In recent years, Turkey has increased its hydrocarbon exploration in the seas in order to ensure energy supply security and to get rid of this burden on its economy. As a result of these exploration activities, Turkey announced that it discovered a natural gas reserve of 540 billion m3 in 2020. This study aimed to guide decision makers in the use of this discovered natural gas. To this end, this paper was examined the relationship between sectoral natural gas consumption and economic growth for Turkey in a multivariate model wherein capital and labour are included as additional variables. Using the annual data for the period 1988–2020, long- and short-run relationships were examined with the autoregressive distributed lag bound testing approach. According to the long-term findings, increases in natural gas consumption in all examined sectors encourage economic growth in Turkey. It has been determined that natural gas consumption in the industrial sector provides the greatest contribution to Turkey’s economic growth. In the long run, a 1% increase in the natural gas consumption of the industrial sector increases the economic growth by 0.190%. On the other hand, it was noted that a 1% increase in natural gas consumption in the conversion sector increased growth by 0.134%, while a 1% increase in housing natural gas consumption increased by 0.072%. In line with the findings obtained, policymakers in the Turkish government are advised to substitute the natural gas used in the conversion sector with renewable energy sources and to use the discovered natural gas reserve for heating purposes in housings, in order to have long-run growth rates.