Analysis Of Factors Influencing Crude Oil Prices

Oil is the blood of industry.The rise and fall of oil prices will have a great impact on economy.Since oil prices have risen sharply during the first oil crisis,and international oil prices have often fluctuated dramatically.As the second oil consumption country in the world,China relies heavily on imports for its domestic oil consumption,and its oil dependence on imports is as high as 70%in 2016.However,China lacks pricing power for oil,and can only accept international oil prices,which is harmful to China’s oil interests.This paper mainly studies the influencing factors of international oil prices,which are of great significance for predicting international oil prices and safeguarding China’s oil interests.Firstly,this paper clarifies the related concepts of oil and oil price by introducing the oil,the petroleum industry chain,the historical changes of the oil pricing mechanism and etc.,which lay a foundation for studying the influencing factors of international oil prices.The core issue of this paper mainly studies the influencing factors of international oil prices.This paper classifies the influencing factors of international oil prices according to its natural property of commodity and financial property.Starting from oil’s natural property of commodity,oil prices are mainly affected by supply and demand.Strong demand pushes up oil prices,and vice versa.The direct factors affecting supply are oil reserves,oil production,reserves to production ratio and oil inventories.Oil inventories can reflect the supply and demand of oil to a certain extent.The indirect factors affecting oil supply include politics and weather,affecting oil prices mainly by oil production and transportation.For oil demand,oil consumption is the direct factor affecting oil demand.Macroeconomic cycles and alternative energy sources are indirect factors affecting oil demand.When it comes to oil’s financial property,the factors affecting oil prices include US dollar and speculation.Oil is denominated in US dollars,and changes in US dollar exchange rate affect oil prices.The current international oil pricing mechanism is dominated by the oil futures,and speculation in the futures market has become an important factor affecting oil prices.Looking at the performances of oil prices under different international monetary systems,since the reform of floating exchange rate system in Jamaica’s monetary system in 1972,international oil prices have fluctuated dramatically.The floating exchange rate system under the dollar standard is the institutional reason for the fluctuation of international oil prices.In order to safeguard China’s oil interests,China needs to improve its oil pricing power in the international oil market.Therefore,China should develop its oil futures market and seize the opportunity of "The belt and Road" to promote the internationalization of RMB.