Oil demand in China: An econometric approach
Authors: Hölscher, J., Bachan, R. and Stimpson, A.
Journal: International Journal of Emerging Markets
Purpose – This study intends to explore the determinants of Chinese oil demand and to build a short- and long-run model. Design/methodology/approach – The study uses the Engle-Granger two-stage cointegration method to create a dynamic short-run model. Data is taken from both international data sources and the Chinese authorities themselves. Findings – The research largely confirms current research in the area. The error correction model finds that only vehicle numbers and real GDP are determinants of the demand in the short-run. The model also shows that there is a fairly slow adjustment from the short-run to the long-run model. Research limitations/implications – The model also shows that there is a fairly slow adjustment from the short-run to the long-run model. Both models find that structural breaks exist in the data and dummy variables were significant in allowing for the regime change. Practical implications – The policy implications not only for China but the whole world are clear. China's demand for oil is growing at a rate that will be difficult to sustain. The world's refineries are currently trying to work at capacity as far as possible to take advantage of the high-oil prices, which continue to rise. Originality/value – This paper provides ongoing confirmation of the importance of China's oil consumption on world markets. © 2008, Emerald Group Publishing Limited