Construction Of Oil Futures Market In China Based On Oil Security

Oil, the blood of modern industry, is an important strategic resource in modern economy. Oil security, playing a direct and far-reaching role in the development of economy and society, is a priority which any nation in the world focuses on. As the acceleration of modernization in China, quantity and dependence of oil import increase year by year, the price fluctuation of international crude oil plays a more and more important role in different aspects of our economy ranging from growth rate of national economy,inflation and international balance of payments to people's clothes,food,housing and transportation, our oil security is facing great challenge. Therefore, it is of great significance to find new ways to the guarantee the sound and rapid development of our national economy besides the traditional means such as energy saving and energy substitution.Futures market, a necessary advanced development of spot market in the commercial economy, is an operation form of credit economy. Futures possesses three functions: price discovery,hedging and market speculation and its development witnesses people's steady risk-avoiding. Oil futures, as an important strategic means to maintain oil security, is helpful to guarantee oil supply and avoid the risk of price fluctuation. Construction and development of oil futures market in China is conducive to win oil pricing power,enhance international competitiveness,improve price-risk avoiding ability for the enterprise,perfect the oil reserve system and promote the development of oil industry.Recently futures market in China enters into a rapid and right development stage through twists and turns. On August 25th 2004, the first oil futures product: fuel oil futures was listed on Shanghai Futures Exchange successfully based on many years preparation, which indicates that oil futures exchange is developing towards a right direction step by step. However under the control of the government, oil industry is basically monopolized by three groups: Sinopec, CNPC and CNOOC. Flexibility is lacked in oil pricing mechanism, and there are barriers of systems and conceptions for the enterprises to enter the oil futures market. In 2004, the"China Aviation Oil Accident"has causes great loss to our state-owned assets. Therefore there is a long way to go for the development of oil futures market in China. Based on the experience of oil futures market construction home and aboard, this paper provides a construction framework ranging from macroaspects such as general strategy and construction principle to microaspects such as reform in oil market, choice of oil futures exchange, order design of oil futures contract, risk management of oil futures and the attached futures law construction.