International Oil Price Fluctuations Of Reasons: Financial Perspective

This paper upholds the increasing financial specifications of the oil and discusses the reasons for the fluctuation of the oil price with a financial perspective. Starting from the various attributes of oil, this paper summarizes the factors that impact the fluctuation of oil price as basic supply/demand factors, financial factors and other unexpected factors. The basic supply/demand factors are the decisive factors determining the mid- and long-term oil price, and the inelasticity of short-term oil supply/demand enables the financial factors and other unexpected factors can impact the fluctuation of the oil price.The financial factors include the speculative trading in the future market, the exchange rate for the denominated currency of the oil price and inflation, the impacts of which are of some difference. The speculative trading creates huge volume of paper supply/demand to widen the gap between the short-term supply and demand, and then makes the oil price fluctuate violently. And the exchange rate for the denominated currency of the oil price as well as the inflation, which can impact both the mid- and long-term oil price and short-term oil price, is the long-standing impacting factors for the fluctuation of oil price. As of other unexpected factors, they mainly impact the fluctuation of the oil price through the interaction with the financial actors. Besides, the empirical study shows that the financial factors can magnify the impacts of basic supply/demand factors and make the fluctuation of the short-term oil price self-reinforced. Moreover, the empirical study shows that the impacts of the exchange rate of US dollar are much more important than that of speculative trading.Finally, this paper brings up several policy suggestions with regards to how to cope with the challenges for the globe and promote China's impacts on the fluctuation of the international oil price.