The International Oil Price Formation Mechanism Analysis Studies With The China Petroleum Pricing Model

Oil has always been the indispensible natural resources for the economic development of all nations over the world ever since it's been discovered and commercially utilized in 1859. Studies have found that the drastic fluctuations of the oil prices during the 1970s oil crisis and the beginning of the 21st century are attributed to the interactions of all pricing factors such as the Hotelling rule of resource exhaustion, short supply and increasing demand, OPEC strategy, depreciation of US dollar, financial market speculations and geopolitical issues. China, as the emerging industrial country, with the increasing demand of oil, is heavily dependent on the oil import. Thus, this research on the major factors of world oil pricing and fluctuations and the domestic oil pricing mechanism is of high importance and significance, which will provide constructive proposals to the policy makers.The paper starts with an overview of the world oil pricing mechanism and tries to apply a qualitative and quantitative analysis on the major factors affecting the price fluctuations. The paper concludes that the long-term and short-term price fluctuations are affected by those factors mentioned respectively based upon different economic situations. The price fluctuations has become constant and China should build up its own systematic pricing mechanism such as seek global political dialogues, set up oil commodity future market, increase commercial oil tank storage and speed up the development of new energies to stabilize the economic boom.