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Shell shocked: The impact of foreign entry on the gasoline retail market in China

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  • Elliott, Robert
  • Sun, Puyang
  • Zhu, Tong

Abstract

Since joining the WTO in 2001 restrictions on foreign entry into China's energy sector have been steadily reduced. We investigate the impact of Royal Dutch Shell's entry on the pricing behavior of three varieties of gasoline in the retail market of China. Using a difference in difference pairwise estimator we show that a year after entry, the average absolute price differential of gasoline between two cities increased by around 1.4%, before falling the following year. In other words, Shell's entry caused prices to diverge but only for a short period of time. The largest price effect was found for highly refined fuels in Western cities. Similar results are found when we examine the effect of entry of the top four foreign retailers. Policy implications are discussed.

Suggested Citation

  • Elliott, Robert & Sun, Puyang & Zhu, Tong, 2020. "Shell shocked: The impact of foreign entry on the gasoline retail market in China," Energy Economics, Elsevier, vol. 86(C).
  • Handle: RePEc:eee:eneeco:v:86:y:2020:i:c:s0140988320300293
    DOI: 10.1016/j.eneco.2020.104690
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    More about this item

    Keywords

    Royal Dutch Shell; Price dispersion; Gasoline; Energy;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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