Cointegration Analysis of Demand and Price of the Primary Energy

The cointegration relationship between demand and price of the primary energy in China is tested. The results show that the long-run equilibrium exists between demand and price of the primary energy which is contradictory to the demand theorem. The main reason for the contradiction is analyzed as follows: state control of the energy price, irrational present energy price system, low percentage of the energy cost accounting for the total living or production cost and reluctance for enterprises to use substitute energy. The suggestions of optimizing energy price making system, breaking administrative monopoly, changing the low price or even no price condition of the energy price and improving the market system of energy products is put forward.