Estimating the Efficiency and Impacts of Petroleum Product Pricing Reforms in China

Abstract

Abstract:The efficiency and effects analysis of a new pricing mechanism would have significant policy implications for the further design of a pricing mechanism in an emerging market. Unlike most of the existing literature, which focuses on the impacts to the macro-economy, this paper firstly uses an econometrics model to discuss the efficiency of the new pricing mechanism, and then establishes an augmented Phillips curve to estimate the impact of pricing reform on inflation in China. The results show that: (1) the new pricing mechanism would strengthen the linkage between Chinese oil prices and international oil prices; (2) oil price adjustments are still inadequate in China. (3) The lag in inflation is the most important factor that affects inflation, while the impact of the Chinese government's price adjustments on inflation is limited and insignificant. In order to improve the efficiency of the petroleum products pricing mechanism and shorten lags, government should shorten the adjustment period and diminish the fluctuation threshold.

China-Angola Investment Model

“…Through bilateral and multilateral relations with these countries, China seeks to make vital raw materials available to sustain its own economy. At present, economic growth in China is facing development constraints to their energy supply [2]. Among the energy resources, the supply of petroleum is a major concern.…”

“…China became the world's largest importer of petroleum in September 2013, surpassing the United States, as depicted in Figure 1. China also surpassed the United States in annual gross crude oil imports in 2017, importing 8.4 million barrels per day (b/d) compared with 7.9 million b/d for the United States [2]. At present, China is the world's largest importer of petroleum; therefore, the substantial petroleum demand has driven China to engage in trade relations with many countries and to import huge quantities from various sources.…”

Ore Composition’s Impact on Smelting Profitability: An Optimum Pricing Index Model for Long-Term Nickel Ore Feedstock Purchasing Agreements

“…Alternative to reacting to the market, Liu et al [18], Deng et al [19], Ma [20], Sukagawa [21], and Wårell [22] studied alternative solutions to reducing the erratic pricing trends of commodities. Liu et al [18] found using price reforms to artificially increase commodity pricing had disastrous impacts to the downstream organizations.…”

“…Liu et al [18] found using price reforms to artificially increase commodity pricing had disastrous impacts to the downstream organizations. Deng et al [19] studied the feasibility and related efficiency of a national commodity pricing mechanism, finding current methods of Chinese pricing to be inadequate, largely due to the long duration between adjustment periods. In response to these fluctuating pricing, many organizations have begun to rely on the concept of "spot iron ore pricing".…”

“…Existing literature has identified long-term iron ore pricing agreements as a major problem, being too rigid and failing to reflect market demand [40,41]. While literature has acknowledged the difficulties associated with long-term iron ore contractual agreements [19], research within this area has been limited to models calculating future iron pricings [8][9][10][11][12]. These solutions do not consider the integration of fluctuating iron ore pricing into contractual arrangements.…”