| Oil market has been generally acknowledged to be complicated and unpredictable by academe and the business circles all the time. Oil price fluctuation is one of ventures with most typical characteristic. The forecasting of price and output becomes a difficult problem that economists need to solve urgently. Beginning with the basic powers of oil market, this paper tries to probe into the impact on price from their interests' relationship and decision-market process. The basic powers can roughly be divided into: Oil companies, oil producing / exporting countries, oil consuming/ importing countries and international organizations. 1. Oil companies This type includes main oil companies, independent oil companies, State Corporation of oil and some small-scale companies on the edge of the market. There is a long-time comparatively steady oligopoly mode among large-scale oil companies, because there are also "competitions" in this monopoly market. Their decision-making process depends on others' heavily. Moreover, the owner of oil source and the producer are not the same one and profit goals are inconsistent, which is the destabilizing factor of the business decision of oil companies. 2. Oil producing/ exporting countries, oil consuming/ importing countries We have to consider the influence of political factor when countries participate in the market. Since oil is a heavy poise on the political circles, the behavior of the countries have been waving between reasonable and seemed to be "unrationally". 3. International organizations The main international organization is OPEC, which is Petroleum Exporting Countries. Control of supply is an important measure to impose on the petroleum market. On the demand side, there are IEA (International Energy Agency), EU (European Union) and ASEAN (Association of South-east Asian Nations). Reacting to oil price fluctuation, they set up oil reserve and adopt consistent action on the basis of obligation in order to affect the market. The short-term oil demand has a high income elasticity but a low price elasticity, making demand unable to measure up to the adjustment to oil price automatically. But oil price is extremely sensitive to the change of the supply-demand relationship; even tiny change of the equalization point will result in a large-extent price fluctuation. This kind of demand structure makes the price changing frequently. With the development of the power-saving technology and the exploiting of substitute energy, the long-term oil demand will decrease with rising price in the future consequentially. The minimum oil demand will be consumed by some specific departments. The short-term supply will focus on the market consist of OPEC and non-OEPC. In this imperfect monopoly market, OPEC has an advantage in price determining. Supposing OPEC has a certain short-term income goal, its oil supply curve will be abnormal according to the function. The higher the price is, the lower output is. The lower the price is, the higher the output is. Q = R /P P >0 Rmeans the income of OPEC from oil trade, P is oil price, Q represents the oil output. For a long time, even OPEC has a very limited ability to increase oil production. However, once the effective power-saving technology and substitute energy come out, the oil supply will be forced to reduce for the oil demand declining. Having studied and compared an economic model with another, the author find that the oil price can be divided into several levels. The price explains at the 'bottom' is the basic value component. 1.According to Hotelling's view (Hotelling, 1931), non-renewable nature lead to the result that oil price is always greater than the marginal cost. The difference is called 'scarcity rent'. Marginal cost and scarcity rent compose "user's cost", as the basic price part. 2.The cost is the second level of oil price. It mainly comes from investment, producing and selling the oil product. 3.The discount rate of oil market is an important factor that oil producing countries take into consid...
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