GTAP Resources: Resource Display
| GTAP Resource #5748 |
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"Expanding a Bottom-up Energy Model into a General-Equilibrium Model: Rationale, Formulation and Implementation for Saudi Arabia" by Durand-Lasserve, Olivier, Abdullah Al-Jarboua, Hossa Al-Mutairi, Frederic Murphy, Axel Pierru and Shreekar Pradhan Abstract We present a hybrid general equilibrium model of Saudi Arabia’s economy that takes into account price control policies in the energy and energy-intensive sectors and their consequences for the entire economy under alternative macroeconomic closure rules. We ‘hard-link’ the partial equilibrium KEM model developed at KAPSARC with a computable general equilibrium model that represents the other economic sectors. We use a decomposition algorithm that converges to the solution of the integrated model. We simulate the 2016 fuel price reform and a stylized scenario with a phasing out of all the price controls in the energy and energy-intensive sectors. We use two alternative macroeconomic closure rules; where oil revenues are either saved and invested oversea by the government, or used to stimulate domestic demand. The price reform increases potential GDP by 2.5% to 3% with respect to the baseline (no-reform) case. Full deregulation yields an increase between 12 and 16%. Energy consumption decreases, as higher price trigger higher investment in energy efficiency. As a result, crude oil exports rise. However, exports of non-oil commodities suffer from lower competitiveness due to higher energy prices incurred by domestic producers. The effect of the reform on the structure of GDP depends on the macroeconomic closure. When the additional oil export revenues are saved abroad, households’ consumption thins down; and activity in the non-tradeable sector is negatively impacted. When the oil revenues are reinjected into the domestic economy, the reforms have beneficial impacts on households’ consumption and on the development of the non-tradeable sector. |
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- Baseline development - Climate change policy - Middle East |
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Last Modified: 1/12/2026 11:53:59 AM
