Chinese Linkage Mechanism Of Domestic And Overseas Oil Price

China is facing with a new circle of rebuilding and upgrading of its industrial structure, as the percentage of the heavy industry in economy is becoming higher and higher. In the process of industrialization, the rate of the growing of energy and resources is higher than GDP. Especially, as the high growth of Chinese economy in these 10 years, the demand for the oil has grown sharply. 2003, China became the second biggest consumer country of the oil in the world. Compared with that, the oil supply can not satisfy the strong demand, so we have to rely on the import, and it makes the annual growing of oil import. 1993, China became the absolute oil importing country. 2003, it became the second biggest oil importing country in the world, surpassed Japanese. Right now, 2/3 of the oil supply is made by our own oil industry, and another 1/3 is completed by import. As a result, the oil import is becoming bigger and bigger, and it makes the dependence rate of foreign oil resources going higher and higher.About the mechanism of domestic and overseas oil price linkage, the international oil price has absolute affection to domestic price, so the fluctuation of international oil price will affect the domestic price sharply. The stabilization of oil price is a strong guarantee of healthy growth of economy. And a wholesome linkage mechanism of domestic and overseas oil price cannot only transfer the fluctuation of international oil price to China, in order to help domestic oil company take suitable reply measures, but also can swell the affect power to international oil price, and so can feedback domestic oil market's information to the international market. But because of the current oil price mechanism, it follows the international oil price absolutely, so the domestic price is made by the State Development and Reform Committee according to the international oil price. It's not a good mechanism because it can only reflect the supply and demand of the international market but not domestic one, and it can't reflect domestic consume structure and season changes either. As a result, oil companies can not know the situations of oil market and adjust their activities according to price signal. Generally speaking, international oil price affect domestic price unilaterally. China is lack of capability to join in making international oil price, so it can just accept the price passively and has no way to feedback domestic situation to international markets. More, it can't protect its own oil industry by price lever.These years, the world's economy develops very fast, it arouses sharp demand for oil, making oil price go into the trend of heightening. Because of our oil price mechanism, the high international price transfers to China immediately. The State Development and Reform Committee have to heighten domestic price, and it has sharp affection to Chinese economy. The incessant increase of oil price is a big threat to the stability of economic growth. Especially in the background of the high-trend of dependence rate of foreign oil resources, our energy safety is facing with very dangerous situation. It's necessary for us to do research on the relationship of the international and domestic oil price, and to be very familiar with how the fluctuation of international oil price affects our domestic price, and then find out the measures to protect our economic growth. This essay is to analyze the problem of our current linkage mechanism of domestic and overseas oil price is that we can not affect the international oil price but can only accept it. Then research how the high oil price affect Chinese economy and then bring forward the measures to avoid the bad affection of the high oil price.