Research On The Transmission Effects Of International Crude Oil Price Fluctuations On Domestic Price Level

Along with the accelerated process of economic globalization, the impact ofexternal factors on the domestic price level cannot be ignored. Among them, theimpact of international crude oil price is particularly prominent. As a vital energy witha long and complex industrial chain, crude oil is closely related to the price level of acountry. China is in a stage of rapid economic development and importsa largenumber of crude oil to meet demand, leading to a continuous rise in our dependenceon foreign oil. This dependence enables the effects of international crude oil pricefluctuations on domestic price level to become an increasingly important issue.Therefore, in-depth study of the path of international crude oil price volatility to thedomestic price level, and explorationofthe dependence of the path on the refined oilpricing mechanism from a quantitative point of view,will provide an importantreference value for the development of relevant policy.At first, this article discusses price transmission theory and implementationapproaches of the international crude oil price fluctuations on China’s price level, andcombs the reform process of domestic oil pricing mechanism. In order to verify thetheoretical analysis of policy factors, this paper uses co-integration analysis methodtoinvestigate the long-term stable relationship between international crude oil price anddomestic oil prices, and the impact of domestic oil pricing mechanism reform on thisstable relationship.By confirmingthe conduction pathsin the theoretical analysis arefeasible, the paper furtherestablish structural vector auto regression (SVAR)models,using impulse response function and variance decomposition to compare theimpacts of different conduction paths. The results showed that there exists a stablelong-term relationship between international crude oil price and domestic crude oilprice, as well as that between international crude oil price and domestic refined oilprice.Due to refined oil pricing mechanism reform, the impact of international crudeoil price volatility on China’s refined oil priceis more significant. Since China’s newoil pricing mechanism implemented in2009, fluctuations in international crude oilprice may change the CPI via the domestic refined oil price. In the different pathways,the extent of the impact of international crude oil price fluctuations on the CPIis ofsignificant differences in the statistical sense, and the transmission mechanism ofpetroleum products is more efficient than that of organic chemical products.