Time Series Analysis of Fossil Fuels Consumption in Slovakia by Arima Model

According to the Green Deal, the carbon neutrality of the European Union (EU) should be reached partly by the transition from fossil fuels to alternative renewable sources. However, fossil fuels still play an essential role in energy production, and are widely used in the world with no alternative to be completely replaced with, so far. In recent years, we have observed the rapidly growing prices of commodities such as oil or gas. The analysis of past fossil fuels consumption might contribute significantly to the responsible formulation of the energy policy of each country, reflected in policies of related organisations and the industrial sector. Over the years, a number of papers have been published on modelling production and consumption of fossil and renewable energy sources on the level of national economics, industrial sectors and households, exploiting and comparing a variety of approaches. In this paper, we model the consumption of fossil fuels (gas and coal) in Slovakia based on the annual data during the years 1965–2020. To our knowledge, no such model, which analyses historical data and provides forecasts for future consumption of gas and coal, respectively, in Slovakia, is currently available in the literature. For building the model, we have used the Box–Jenkins methodology. Because of the presence of trend in the data, we have considered the autoregressive integrated moving average (ARIMA (p,d,q)) model. By fitting models with various combinations of parameters p, d, q, the best fitting model has been chosen based on the value of Akaike’s information criterion. According to this, the model for coal consumption is ARIMA(0, 2, 1) and for gas consumption it is ARIMA(2, 2, 2).