Estimating the long-run crude oil demand function of China: Some new evidence and policy options

China's remarkable economic progress over the past three decades has been complemented by massive energy consumption. Although coal has long been the primary energy source, the rise in crude oil use has been viewed as more contentious, because a large portion of crude oil is imported, whereas the economy is mostly self-sufficient in coal. We examine the role of R&D effort and self-sufficiency on China's oil import function from 1980 to 2020. Using the autoregressive distributed lag model, we find that the R&D effort raises oil imports in the long run. However, we find oil imports to be independent from self-sufficiency in the long run. We also find that China's accession to the World Trade Organization has significantly changed the cointegrating relationship in the oil import function. Our results suggest that the government should continue to incentivize energy-saving measures and fund research projects on renewable energy sources. Furthermore, deregulation in the oil market is quin-tessential to energy security and stable growth in the long run.

Automated summary

China's economic progress in the past three decades has led to significant energy consumption. While coal has traditionally been the main source of energy, the increase in crude oil usage has raised concerns due to its large reliance on imports. This study examines the impact of research and development efforts and self-sufficiency on China's oil import function from 1980 to 2020. The findings show that research and development efforts have a positive effect on long-term oil imports, while self-sufficiency does not significantly affect oil imports in the long run.