The Research On Frontier Issues Of Oil Financialization Market

With the development of society and globle economy,"oil financialization" hasgradually become a common phenomenon in global economy, which is reflected infinance-based price system financialization, manipulation and intervention byinternational speculative capitals towards oil market and price, and the close tie betweenoil and international monetary system. Oil-financial market system is formed throughmutual penetration and integration between oil and financial markets. It originates frombut is independent from the oil market; it is expanded constantly in boundary andconnotation to become an important component of modern international financial market.In this sense, oil and finance have been linked closely.Since modern oil industry was born, it has been150years, during which, theformation mechanism for international oil price has changed for several times. After twostages, i. e. monopoly of European and American oil companies and official control ofOPEC, an actual oil market as well as a pricing mechanism based on supply and demandappears in later1970s. After1990s, international futures market grows vigorously, when alarge quantity of oil transactions are conducted in financial market and the futures pricehas become an internationally prevailing standard for pricing of world bulk commodities.The development of oil futures market shows oil is most favored by heavy investment infutures market, leading to increasingly obvious "financial attribute" of international oilmarket and frequent use of the word "oil financialization" to describe the price fluctuationin international crude market.In recent years, speculation has grown into a main factor affecting oil price;speculative forces represented by hedge fund enter the oil derivatives market in successionand cause severe fluctuation of international oil price with their participation in bothactuals and derivatives. Financialization of oil market is fully shown in speculation offinancial institutions in oil market. International oil price is not only an economics conceptwhich is based on marginal cost of producers in oil market and consumer effect function and reflects balance between supply and demand, but also a financial concept whichinvolves a large quantity of financial speculations. The outbreak of subprime crisis makesmain economic entities in the globe commonly recognize the importance to strengthfinancial supervision and take a series of reform measures.For the medium position of oil transaction is monopolized by American dollar,monetary policy in America becomes an important decisive factor of oil price. Hegemonicmonetary system of American dollar is a loose international monetary system undermanipulation, which inclines to be used by strong economic entities to transfer financialcrisis and obtain more profits without responsibilities to be taken. Adjustment of monetarypolicy in America leads to the change of exchange rate and interest rate in differentdirections, which causes speculation of hedge fund in oil price. Affected by exchange rate,interest rate and inflation, the fluctuation of oil price has developed into a financial andmonetary phenomenon thoroughly.Based on the relevant promises made by China upon its joining of WTO, oil andfinancial markets in China will be opened gradually, with nature of oil safety transferringfrom "production-supply" to "trade-finance". In spite of an oil importer and consumerranking second in the world, China, at present, has a relatively closedgovernment-dominated pricing mechanism and oil circulation system led by monopoly oftwo large groups, which goes against oil supply safety objectively. Therefore, enrichmentand improvement of ways for oil-financial development plays an important role inensuring Chinese oil-financial system’s function of resource distribution and enhancing theChina’s position in international oil market structure.This topic is divided into six parts in total:Chapter I "Introduction" mainly states research background, significance, purpose ofthis topic, research achievements at home and abroad as well as research methods andframed structure of the thesis, and summarizes main innovations of this topic.Chapter II "Financialized Oil Market System" studies financial attributes, economicfunctions and main features of oil and analyses the structure of financialized oil market interms of trading place, oil financial products and participants in the market. Chapter III "Price Mechanism of Financialized Oil Market" discusses internationaloil market structure and pricing mechanism evolution through historical analysis andcomparison, reveals the inevitable rule under which the international oil market developsfrom monopolization to competition, and studies the general formation mechanism andhistorical fluctuation features of international oil price.Chapter IV "Financial Hegemonic System of Oil Dollar", also in combination withspecification and demonstration as well as quantitative approach and qualitative approach,proofs hegemonism shown by oil dollar and significant impact of dollar devaluation ondollar hegemony, through analysis on price transmission mechanism of oil dollar andrelevance between oil price and monetary policy.Chapter V "Financial Speculation and Supervision in Oil Market", in combinationwith specification and demonstration as well as quantitative approach and qualitativeapproach, proofs speculation is a systematic factor to push oil price, through analysis onmanipulation of speculative funds in international oil market and on supervision loopholesin financial capital speculation shown by subprime crisis.Chapter VI "Analysis and Thinking on Oil Market in China" proposes severalmeasures and suggestions on improvement of financialized oil market in China afteranalysis on current situations of oil market system in China.Main innovations of this topic lie in:1. Innovation in theme and purposeOil financialization is observed by the society only with soaring of oil price in recentyears and develops into an important issue affecting national economy and the people’slivelihood. This research field is not only new but also good. This thesis analyseshistorical structure, structural form, participants, transaction mode and place concerninginternational oil market, discusses current situations of actual market, futures market andoil derivatives market and use forms of futures, options and other trade tools, and thenstudies, in combination with currency, exchange rate, speculation, liquidity and otherfinancial factors, financial attributes of international oil market, which is a comprehensiveinterdisciplinary research scope. Limited by policies, an actual financialized oil market is still not shaped in China, and therefore researches in relevant fields are mainly on how toconstruct an oil-financial safety system in China, which belongs to strategic developmentresearch. Thus, relevant theses on financialization attributes of oil market are rare.2. Innovation in quoted materialsAuthor of this thesis has worked on international oil trade for a long time, known andmastered the primary data and latest trends about international oil market. A large quantityof newest data and latest policy tendency is quoted in the demonstration based on plentifuldocument literatures to illustrate the relevance between international oil market and manyfinancial factors. This thesis analyses in depth the impact of speculation caused bymonetary policy and financial innovation in America on oil market since the new century,reveals the latest problems due to financial supervision loopholes in oil derivatives market,and describes the latest measures adopted by American government to strengthensupervision after financial crisis. All materials involved and quoted are articles orliteratures published in recent years.3. Innovation in analysis perspectivesThe development transition of international oil market from monopolization tocompetition is an inevitable rule and also a demonstration process in which theory andpractice links closely. Starting from the historical structure of international oil market, thisthesis, from speculation, monetary exchange rate, rates change and other uniqueperspectives, demonstrates the inner link between financial attributes and international oilmarket and analyses the relations between logic and facts. Above contents have an activetheoretical and practical significance for prompting of financial risks in international oilmarket, improvement of risk management and control on oil derivatives trade as well asdevelopment of oil-financial market in China.4. Innovation in suggestions and conceivesIn the process of analyzing how to improve oil financialization strategy of China, thethesis proposes using the state foreign exchange reserves to establish oil warehousereceipts in the international oil futures market and convert foreign exchange reserves intooil financial assets, making sure the price relation between domestic finished oil and crude oil and speeding up finished oil price adjustment, making full use of taxation leverto properly adjust levy standards of gasoline and diesel consumption taxes, graduallyimplementing curb exchanges of oil derivatives and accelerating oil futures varietyinnovation and other detailed ideas. All proposals as above are based on sum-up by theauthor after long-term practical works. Therefore, these proposals are featured by strongpracticality and originality.