Abstract
This paper examines whether oil consumption is constrained by output value, applying a cointegration test and an ECM to the primary, secondary, and tertiary sectors in China during 1985-2013. The empirical results indicate that oil consumption in China is constrained by the industrial structure both in the short run and in the long run. Regardless of the time horizon considered, the oil consumption constraint is the lowest for the primary sector as well as the highest for the tertiary sector. This is because the long-term industrial structure formation and the technological level of each sector underlines the existence of long run equilibrium and short run fluctuations of output value and oil consumption, with the latter being constrained by adjustments in industrial structure. In order to decrease the constraining effect of output value on oil consumption, the government should take some measures to improve the utilization rate, reducing the intensity of oil consumption, and secure the supply of oil.
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