Research On The Interrelationship Between Domestic And International Oil Price

Energy issue plays an important role in national economic security, It isincreasingly become a important issue for the decision-making departments tostrengthen the energy market risk management. Along with China’s rapideconomic development, China’s oil consumption is also increasing rapidly. Chinahas become the second largest oil importer after the United States and the secondlargest oil-consuming countries, in2010China’s dependence on foreign oil ismore than55%,and in2011China’s dependence on foreign oil is more than56.5%. With the increasing domestic demand for crude oil, the oil importdependency will continue to increase.2012China’s dependence on foreign oil isexpected to continue to rise,which is expected to reach57%.In this paper, the empirical study of the interaction between domestic andinternational crude oil prices, show that: there is a long-term equilibriumrelationship between the domestic and international oil prices; domestic andinternational oil prices are both Granger causality to each other, the Brent crudeoil price have a leading role on China Daqing crude oil price changes; China’sDaqing crude oil price can also forecast for Brent crude oil prices; dynamicequilibrium relationship exists between the domestic and international crude oilprices. We found that the current Brent crude oil price increase1%will make thecurrent domestic Daqing crude oil price increase of0.756889%. Similarly, thecurrent Texas crude oil price increase1%will make the current domestic Daqingcrude oil price increase of0.598136%.Secondly, this paper use the multivariate GARCH model to test the volatilityspillover effects of domestic and international oil price. The results show that,whatever we use Brent crude oil prices as a representative of the international oilmarket, or Texas crude oil prices as a representative of the international oilmarket, the research findings show that volatility spillover effects of foreign oilprices to the domestic oil price is quite significant，and the volatility spillovereffect of domestic oil prices to international oil price is relatively weak.Therefore, the conductivity of the oil market information is mainly from theinternational market passed to the domestic market.The revelation of The conclusions of empirical research on our policy are asfollows:(1) Firstly，we must establish the oil futures market as soon as possibleso that enterprises can take advantage of hedging, hedging and risk management practices to circumvent the losses caused by oil price volatility;(2) Secondly，accelerating the establishment of a more perfect oil market pricing system,greater use of taxes and other means to regulate and guide the market, to avoidthe administrative means the maximum to intervene in the formation of oil pricesin China;(3)Lastly，our country should actively participate in international oilpricing.