Shell shocked: the impact of foreign entry on the gasoline retail market in China

Rob Elliott, Puyang Sun, Tong Zhu

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Abstract

Since joining the WTO in 2001 restrictions on foreign entry into China's energy sector have been steadily reduced. We investigate the impact of Royal Dutch Shell's entry on the pricing behavior of three varieties of gasoline in the retail market of China. Using a difference in difference pairwise estimator we show that a year after entry, the average absolute price differential of gasoline between two cities increased by around 1.4%, before falling the following year. In other words, Shell's entry caused prices to diverge but only for a short period of time. The largest price effect was found for highly refined fuels in Western cities. Similar results are found when we examine the effect of entry of the top four foreign retailers. Policy implications are discussed.
Original languageEnglish
Article number104690
Pages (from-to)1-16
Number of pages16
JournalEnergy Economics
Volume86
Early online date22 Jan 2020
DOIs
Publication statusPublished - Feb 2020

Keywords

  • Royal Dutch Shell
  • price dispersion
  • gasoline
  • energy

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