Research On The Sinopec Profitability Enhancing To Deal With International Oil Price Volatility

As an important strategic resource, oil has played an important role in world economy.Meanwhile, the contradiction between the rapid economic development and thenon-renewable oil resources is increasingly prominent, coupled with the impact offinancial,political and other fields, which lead to crude oil prices volatility in the21stcentury.Fluctuation in oil prices affect the profitability of the oil companies to a certain degreethrough price transmission mechanism.Our country has no power in international oil price setting, while the three major oilcompany in China, Sinopec is the largest oil refining and petroleum products manufacturer,and its refining and marketing segment are most closely related to the oil volatility, sointernational oil prices has the greatest impact on Sinopec in China. Sinopec is facing oilprice risk currently: oil purchase price with international market; on the other hand, thedomestic oil prices are setted by the National Development and Reform Commission, whichleads to domestic oil prices lagging behind international oil prices. Therefore, wheninternational oil prices fluctuated, domestic oil prices remain stable and low level, theprofitability of Sinopec will be affected to a large extent. Therefore, the analysis of oil pricesvolatility impact on the profitability of Sinopec, and proposing solutions has a greatsignificance for the sustainable development of Sinopec, and the same to economicdevelopment and energy security in our country.Firstly, the article relies on the basis of theories about oil prices and profitability, thenanalyze the relationship between oil price volatility and the profitability, build profitabilityindex system drawing on the existing profitability indicators system, which meet in Sinopecstatus and the analysis content of this article. Next, make factor analysis on profitability indexsystems of Sinopec, CNPC, BP and Shell, and draw common factors, calculate profitability factor score; After that, make regression analysis between WTI oil prices and comprehensivefactor scores, established regression models of the four oil company, then comparing thequadratic coefficient and goodness of fit, we draw a conclusion that Sinopec had beensignificantly affected by oil prices fluctuation. Finally, analyze the reasons that theprofitability of Sinopec affected by the oil price volatility, and propose suggestions related todealing with the oil price fluctuation and improve profitability, including exploringinternational market, avoid price risks by futures trading, strengthening management andtechnical innovation, and provide experience for domestic oil companies.