Industrial structure and oil consumption growth path of China: Empirical evidence

The relationships between industrial structure and the respective growth paths of oil consumption of the primary, secondary, and tertiary industries in China are examined. Based on the results, the degrees of grey correlations between total oil consumption and output values of the primary and secondary industries in China have declined, whereas that between Chinese oil consumption and output values of tertiary industries has increased. Using the VECM (vector-error correction model), the long and short run relationships between oil consumption and the three types of industries are identified. From 1978 to 2009, the long-run elasticity of total oil consumption with respect to the output value of tertiary industries ranked first, followed by the secondary industries. The negative effects of the primary industries on total oil consumption result from the "crowding out effects" of the two other industries. Although the error correction coefficients are small, the short-term impacts of the inhibition of oil consumption are limited, and China's oil consumption growth shows strong continuity and inertia. Causal tests and cointegration show that output values of the three types of industries Granger cause total oil consumption in the long run but not in the short run.