Analysis On Administrative Monopoly In Vertical Integration Of China Petroleum Industry

In1990s, many M&A between international oil majors happened in the international oil market. The scale and the frequency of M&A are unprecedented. These M&A are to improve their integrated industry chain and form core competitive ability. The competition between enterprises in the oil market has become competition between enterprises’integrated industrial chains. upstream and downstream business integration reform on the China’petroleum industry is implemented by government in1998.In recent years, China’s dependence on foreign oil rose and with China’s entry into WTO and the opening of the China’ petroleum industry, it is confronting increasingly competitive pressure from foreign companies. Under such circumstance, how to effectively promote the development of vertical integration of Chinese oil industry and train its core competitive ability need to study further.By the method of administrative monopoly, analyzing the interaction between market structure and vertical integration of the Chinese oil industry, we can find out influencing factors of how vertical integration develops in the aspect of structure. Then policy can be recommended to promote the development of vertical integration of China’petroleum industry.Content of this dissertation is as follow:Firstly, this dissertation studies the relevant theories on vertical integration theory and empirical analysis of vertical integration of petroleum industry. As an integral part of this study, this part will lay a theoretical foundation of this dissertation.Secondly, this dissertation mainly studies the development situation of vertical integration of Chinese and foreign oil industry. The foreign oil companies engaged in vertical integration in different foundation and patens, but they choose the integration of the upstream and downstream business in the end and continuously improve their integrated industry chain. The competition in the international oil market has become competition between international oil majors’ integrated industrial chains. China’s oil industry development inevitably trend towards vertical integration. Vertical integration development of China’s petroleum industry begins late and it really entered into vertical integration stage in1998, but it develops rapidly.On the basis of above research, this dissertation this dissertation the influence of vertical integration on market structure of China’s petroleum industry. This dissertation mainly analyzes the change of market structure of China’s petroleum industry after1998from market concentration rate and industrial scale level in the method of qualitative and quantitative analysis. Upstream market structure is oligopoly market structure based on geographical segmentation and seriously influenced by administrative monopoly. Downstream market structure is duopoly leaded by CNPC and SINOPEC. There is higher administrative monopoly in downstream in the beginning of the reform, but with the market-oriented reforms to advance, its administrative monopoly has been greatly reduced, and market-based instruments have been the main way to promote the development of the downstream. After1998, the industry scale level has improved rapidly. The Chinese oil industry scale level close to the world average in terms of production scale at both the Group corporate level and the enterprise level. Production scale of CNPC and SINOPEC close to the major international oil companies and the average scale level of their refineries are higher than the world average. But diseconomies of scale still exist in China’s oil industry. On the basis of severe uneven distribution of value in upstream and downstream, we find the influence of vertical integration on duopoly of downstream in the upstream administrative monopoly. Absolute competitive advantage of integrated industry chain of CNPC and SINOPEC given upstream administrative monopoly builds and maintains duopoly of downstream.Further, this dissertation analyzes the influence of market structure of China’s oil industry on vertical integration. Based on the analysis of double marginalization model, we find market structure has an important impact on vertical integration. Monopoly positions owned by enterprise in its industry and monopoly factor existing in the industry it will enter into are premise of vertical integration. The factors that determine the market structure can be divided into economic factors and policy factors, both of which can affect the market behavior of enterprises in the industry. This dissertation analyzes the influence of product differentiation and economic barriers to entry on vertical integration by theoretical and empirical argumentation in the method of logical deduction and case analysis. In the short term, oligopoly of China’s oil industry and economic factors of market structure promote the development of vertical integration. The analysis of the influence of policy factors of structure on vertical integration reveals upstream administrative monopoly hinder the development of vertical integration in the long term.Finally, this dissertation makes a summary of the main conclusions of it, and puts forward policy recommendations on the basis of the above analysis.Relying on above contents, the innovative points of this dissertation are:(1) the dissertation uses the theory of industrial organization to the interaction between market structure and vertical integration of the Chinese oil industry in administrative monopoly. Previous studies focus only on structure or behavior. Based on their studies, this dissertation mainly analyzes the interaction between market structure and vertical integration of the Chinese oil industry.(2)The dissertation, from the perspective of vertical integration, analyzes the formation mechanism of the market structure of the oil industry. Vertical integration has a higher influence on downstream.(3) The dissertation use empirical analysis to study the impact of policy factors on the development of the vertical integration of China’s oil industry.