Oil consumption and economic growth: The case of Brazil

This study attemps to look into the causal relationship between oil consumption and economic growth in Brazil where oil consumption and real gross domestic product (GDP) have been rapidly increased in recent years. To this end, the study employs annual data covering the period 1965–2010. Tests for unit roots, co-integration, and Granger-causality based on the error-correction models are presented. The overall results support the existence of bi-directional causality between oil consumption and economic growth in Brazil. This means that an increase in oil consumption directly affects economic growth. Thus, in order not to make an adverse effect on economic growth, Brazil should endeavor to overcome the constraints on oil consumption. Moreover, it appears that economic growth induces oil consumption.