China's Oil Futures Research

China stands as the third largest energy-consuming country after United States and Japan, but the domestic supply of energy cannot satisfy the soaring demand, resulting in the expanding import of energy from outside.In contrast to the falling share of coal in the energy structure, petroleum and gas account for a growing importance. China depends more on energy to develop itself than do developed countries. From 1993 onwards, China has become the net importer of petroleum, and the net importer of crude oil in 1996. The degree of external dependence of petroleum is estimated to be approximately 60 percent for China in 2020.As its economy grows fast, China is now confronting the increasingly urgent issue of energy security, especially petroleum security. The solution to petroleum security lies in the construction of petroleum security system, which consists of supply security and price security. For the goal of supply security, China should follow suit of industrial economies to establish the strategic reserve of petroleum. On the other hand, the imbalance of the supply and demand in the international market leads to the extreme variability of petroleum price influencing macro-economy to a large extent. The resultant economic uncertainty makes the production and sales difficult to handle, thus harming the predicted course of development, which is exact case in China. To ward off the petroleum shock and shelter from price volatility in the world market, it's time for China to establish our own petroleum futures market to stabilize the price of petroleum, which is obviously a special resource connected closely with national lifeline.Chapter two provides the theoretical support for the petroleum futures market. Futures is a means of risk management, and futures market is an effective systematic arrangement of risk diversification, where "risk" refers to systematic risk together with non-systematic risk.As an advanced development form of spot market, futures market is the developed mode of credit economy as a necessary outcome of market economy. There is a long period and natural course from the original futures transaction to the modern futures market, one of the important motivations is the reduction in the transaction cost.There are three coherent functions of futures: price discovery, hedging and speculation. Market agents are normally limitedly rational, and the market information is always incomplete, different dealers trade with their prediction of the future to form the information of forward price, this means the price discovery of futures, which is, of course, a dynamic concept focusing on the price trend.The prices of futures goods and spot goods have in common the price tendency, and futures is margin transaction, both of which act to be two basic conditions for hedging function. By means of hedging transaction in the futures market and spot market simultaneously, dealer can effectively lock in the loss as least as possible.What is traded in the futures market is the futures goods with fluctuating price, the fact provide a chance to make a profit through the price difference. Speculators are just the opposite of arbitrager, who are risk lovers, however, the latter are apparently risk averse.Futures market is an indispensable component of modern market system, because it can lower transaction cost and increase economic efficiency, moreover, futures market can enhance the comprehensive competition capacity, and in the end, safeguard national security.Petroleum is closely linked to finance with mutual influences, so does petroleum futures with financial transactions. In the context of China, petroleum futures is able to enrich and stimulate the futures market, facilitating the realization of its overall function. After the accession of WTO, the development of futures market for China is a promising task but still has a long way to go.Chapter three takes a look at the development path of world petroleum futures market. Since its appearance in 1970s,...