Petroleum Price Fluctuations On Effect Of Chinese Price Level

The petroleum, an important strategic resource, takes an imperative role in national economy, whose price, influenced by various factors, fluctuates fiercely. The history witnessed three oil shocks, during which the international petroleum price failed to influence that of China since it took strict control over oil trade and price. However, since 1993 ,our nation began growing one a nation of net-import petroleum, and moreover, China's economy, in the industrialising stage, grew rapidly and continuously, which led to the widening gap between the petroleum supply and demand day by day, and finally to the soar of the import volume. After the turning of 21st century, China lay its 50% independence on import, while during that period, the international petroleum fluctuated violently. China obtains its over 90% petroleum through general trade, resulting in the barrier-free access of international petroleum price to our domestic, which caused the severe volatility of China's recent price level. Under the above backgroud, this thesis, by analysing China's current petroleum supply and demand as well as trade situation, aims at verifying the influence of international petroleum volatility to China's price fluctuation in recent years.Firstly, thesis deliverers a description to the fluctuation of petroleum price with figuring out the characteristics and cause of this petroleum price volatility. In addition, it gives a depiction of China's present price level, and finds the linkage between China's price level and the international petroleum price.Secondly, it comes to an analysis of the mechanism of petroleum price fluctuation placing a premium on price level volatility, which lays its focus on the vital role of petroleum in national economy, China's current situation of petroleum market, the analysis of how petroleum price volatility leads to that of price level by theoretical model, and finally a profound parsing of the pathway through which petroleum price affects price level.Based on the above theoretical analysis, this thesis gives an empirical test to the relevant data through VAR model.Then through the pulse analysis and variance decomposition, it probes the effect degree of petroleum price to China's price level volatility.Finally, this thesis launches its suggestion on governmental policy about decreasing the affect of petroleum price fluctuation on that of the price level. Specifically, China should mainly reform price mechanism of oil market, establish oil reserve and oil futures market, improve the utilization efficiency of resources, develop new resources, etc, thus fighting against the impact of oil price fluctuation to China's price level.