Emal Address:
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Energy Security and Long-run Stable Growth of Chinese Economy
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Title:
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Energy Security and Long-run Stable Growth of Chinese Economy
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Author:
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Zili Yang
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co-Authors:
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Organization:
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State University of New York at Binghamton
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Personal profile:
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Login required for author information!
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Conference presentation:
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CES2006 Governing Rapid Growth in China: Efficiency, Equity and Institutions
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Abstract:
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Rapid economic growth of China in past two decades, thanks to the economic reform and “open door” policies, has changed the energy situation of China completely. China transformed into a significant petroleum importer from an exporter decade ago (China Energy Statistical Yearbook, China Statistical Yearbook, various years). Geopolitical upheavals in oil-rich regions increase uncertainties in the future supplies of petroleum to China and other net importers; booming private car ownership in China adds pressures from demand side. The outlook of petroleum market in China is challenging.
In this paper, we examine strategic positions and policy responses to energy security challenges. Using the similar modeling framework in “How Does ANWR Exploration Affect OPEC Behavior? A Simulative Study of an Open-loop Cournot-Nash Game,”(Zili Yang, forthcoming Energy Economics), we set up a dynamic model of petroleum supplies to China in a Hotelling paradigm (namely, oil supplies are treated as exhaustible resources and their rents show upward trend in the long-run).
In the model, OPEC countries, Russia, and China itself are major suppliers of domestic market of China. Import supplies are subject to the demand shocks from other regions, such as USA and Japan. Suppliers strategically interact with one another. Importing suppliers, especially OPEC countries, might collude and manipulate quantities and prices. China will choose optimal strategic responses, both in domestic supplies and import demands, to different scenarios.
Methodologically, the model is a game-theoretic simulation model. Mathematically, it is an optimal control model of exhaustible resource depletion. Major petroleum suppliers interact strategically in an exhaustible resource industry to meet domestic consumption demand. The model will be calibrated with the recent data. The solution concepts include oligopolistic competition and Cartel collusions among foreign suppliers. The model is solved numerically in GAMS language for its “open-loop” Nash equilibrium. Different from conventional computable general equilibrium (CGE) models, the modeling approach here is foreword looking dynamic and capable of capturing strategic interactions among agents.
Several scenarios, such as different levels of car ownerships (domestic demand curve shifts), industrial structures (competition or collusion among suppliers), and different level of demands by Japan and USA (supply shocks from China’s perspective) will be solved and compared. The optimal response strategies of China will be identified and examined. Because the model is carefully calibrated with data, magnitudes and directions of strategic profiles of different regions would be proportional to reality. The model simulations would be helpful and indicative to designing energy security policies for China.
Note: full paper will be ready before the deadline for the proceeding editing and be available for session commentator(s).
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Full-text paper link:
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@copyright by Chinese Economist Society.