Impact of removal of city gas subsidies on Chinese urban residents

The current cost-plus natural gas pricing mechanism makes the gas price too low, resulting in a lot of consumer-side subsidies, which makes natural gas over-consumed. This paper applies the price-gap approach and input-output analysis technology to quantitatively analyze both of the direct and indirect effects on urban residents on the condition that natural gas subsidies are cancelled in China in 2007. It is shown that the gas price will increase by 33.3%-41.6%, and the residential consumption expenditure by 0.26%~0.33%. The low-income groups are mostly affected, so different subsidies should be implemented, to make subsidies more efficient.