Cointegration Analysis on the Relationship of China's Industrial Structure Change and the Oil Demand

Abstract

In order to understand the law of China's oil demand growth, we use cointegration method and build up the vector error correction model to do quantitative analysis on the relationship among China's three industries' output values and its oil demand. Our results can be summarized as follows: i) the growth of China's oil demand is relatively inertial; ii) the impacts of three industries' output values on the oil demand are not the same in the short term; iii) China's oil demand has the capacity to adjust its growth reversely in the long term. Knowing these clearly will help us to take more specific measures to balance the oil supply and demand.