International Petroleum Security Situation Of Construction Of China's Oil Futures Market

The oil is essential for a country’s economic development for it is the lifebloodof modern industry and the economic lifeline of the community. Therefore, the oilsecurity is one of the important factors to guarantee a country’s economic securityand social stability. At present, the international oil security is very severe.With the rapid development of the global economic, the degree of dependence on oilof countries is growing day by day, and most dependent on imports. Among thesecountries, the rapidly rising Asian countries especially depend on the oil-importing ofMiddle East more severely, which accelerates the imbalance of oil supply anddemand situation on some degree. Therefore, it will endanger the stability of mostcountries’ society and economic environment. In recentyears, the society environment of the Middle East region is still unstable, thewar can be easily triggered and the oil prices are also volatile, which pose athreat to the stability of the global economy. The Iranian oil crisis that broke outrecently has alarmed China to guarantee oil security yet.Based on such severe oil security situation above, the author proposes that theconstruction of oil futures market can guarantee domestic oil security. At first, thearticle introduces the distribution and consumption of global oil, as well asinternational oil industry status quo, mainly about some major events occurred inglobal oil field in2011, then makes an analysis on the situation of international oilsecurity and puts forward the plight it will face. Through research, the author findsthat China’s oil industry has several issues such as unreasonable industrial model,excessive foreign dependence, lack of oil pricing power and so on. While, the articlealso describes the oil futures market, including the financial property of the oil andthe history of the oil financing, the main features, functions and effects, as well as thedevelopment status of the oil futures market. Among them, the functions of avoidingrisk and discovering price of the futures market have been described in detail, whichare the points of the article. The author finds the international oil prices fluctuatefiercely after2007by calculating the volatility of WTI crude oil prices from January2000to November2007. Then selects the spot and futures prices of Brent crude oil inthe first quarter of2012as the sample data, and calculates the optimal hedge ratiousing the minimum variance model. Based on the hedging function of futures market, we can avoid the risk of international oil price fluctuations effectively and enhanceour international competitiveness; based on the price discovery function of futuresmarket, we can form an open, continuous, predictable and authoritative price, whichis helpful for us to compete for oil pricing power and maintain the economic interestsof our country; Besides, there are a large number of arbitrageurs andspeculators in the futures market, which can enhance the liquidity of the market andoptimize the allocation of resources. Then the author puts forward the necessity andfeasibility as well as the main constraints of China’s oil futures market construction,including unreasonable monopoly model of our oil industry, the deficiency of oilpricing, risk control, market supervision and legal mechanism. The author also makessome feasible suggestions on two aspects of improving oil market and futures marketbased on the actual situation of China, and puts forward the view that China couldconstruct a multi-layered oil trading system that takes oil futures market as the core,oil spot and forward markets as well as the OTC market of oil derivatives as theattachment.Based on having collected some data and schematics, referred to documentresearch on international and domestic oil market, the author summarizes the severesituation of international and domestic oil security, and uses the method of integratingtheory with practice to make an analysis on the special functions and effects thefutures market has, then puts the financial property of the oil and the construction ofoil futures market together appropriately and proposes the importance of guaranteeingthe oil security through constructing the oil futures market. Several scholars beforehad explored and researched on the construction of oil futures market, but thesituation is always changing, especially the oil security situation, so the authorconcerns about current international situation and China’s national conditions moreand focus on the association between the financial property of the oil and the functionof price discovery of the futures market.