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Regulation Strategy of China's Petrol Market: Empirical Evidence from Beijing

Author

Listed:
  • Zhengwei Ma
  • Rui Xu
  • Chi Chen
  • Teng Wu

Abstract

Traffic congestion is now an intractable problem in China, causing serious air pollution and oil shortages. This problem must be solved; otherwise it will restrict China's economic development. This paper demonstrated the impact of petrol prices on the congestion index based on the statistical analysis with the SPSS 19.0. The results indicate that the two factors were negatively related, even allowing for the time lag of consumers' purchase decisions. In other words, the traffic problem can be solved to a certain degree by petrol price rises. Before making this suggestion of raising petrol prices, the authors attempted to discover the potential effect on the Chinese macro economy because of the predominant role of petrol price in China's secondary industry. They simulated the possible scenario with the derivative of a Computable General Equilibrium (CGE) model MCHUGE from the prospects of long-term, short-term and secondary industry. After the simulation, it was concluded that the increase in petrol price will not have crucial impact on the macro economy but will optimize the structure of secondary industry. According to the previous implications, a new pricing scheme (step tariff on petrol) is suggested which is quite suited to the Chinese market.

Suggested Citation

  • Zhengwei Ma & Rui Xu & Chi Chen & Teng Wu, 2015. "Regulation Strategy of China's Petrol Market: Empirical Evidence from Beijing," Energy & Environment, , vol. 26(3), pages 335-347, April.
  • Handle: RePEc:sae:engenv:v:26:y:2015:i:3:p:335-347
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