A reasonable energy price is an important endogenous force driving the sustainable development of energy production and consumption. However, affected by multiple factors such as government regulation, monopoly power, and market segmentation, the prices of several energy types in China have different degrees of distortion, which seriously hinder the optimal allocation of energy resources. Therefore, this article first analyzes the existing problems in China’s energy price mechanism, then refers to the energy element to construct a time-varying elastic production function to measure the degree of distortion of energy price, and finally puts forward policy suggestions.