Empirical Analysis On The Transmission Route To Domestic Price Level By The Price Of The International Crude Oil

International oil market has always been a volatile market. From three oil crises in the last century to an ongoing fall in international oil prices in the second half of 2014, the international oil price has experienced drastic fluctuations. O il is a major international commodity, known as the economy "black blood", and has important strategic significance to the economic development and national security. As a rapid developing country, C hina’s oil demand is huge, but domestic oil supply is limited. Because China’s dependence on foreign oil increases rapidly, the international oil price has more and more important influence on the domestic price level.In this background, this paper focuses on the history of international crude oil price fluctuations, the causes of international crude oil price fluctuations and the relevance of domestic crude oil prices to abroad,etc., and it’s concluded that there is a strong correlation between the international crude oil price and the domestic crude oil price, and domestic crude oil price basic is integrated with the international market. Based on the study of predecessors that international crude oil price has a significant influence on the domestic price level, the paper provides insights into the mechanism of international crude oil price on domestic prices, and put forward three transmission paths of the international crude oil price’s transmission to domestic price level which based on the assumption of energy consumption, the energy production consumption, and chemical raw materials. This paper expound the theoretical basis of three conduction paths from the economic perspective, and then explain the characteristics and principles of three conduction paths separately. In the end, analyze the relationship of three conduction paths comprehensively.For the conduction path analysis based on energy consumption, international crude oil price directly affects the consumer market through domestic energy prices.Energy prices not only directly impact the consumer market but impact the consumer market through the productions. For the conduction path analysis based on energy production consumption, energy prices will influence production and vice-versa.The two price conduction paths have a common node with energy prices, illustrating the two conduction paths have crossed. Based on the conduction path analysis of chemical raw materials, the international crude oil price has an effect on chemical raw materials market, and chemical raw material price fluctuations will affect PPI, which has a common node with this the transmission path based on the energy production consumption.This relationship of each other illustrates the complex impact international crude oil price on domestic price level, and also illustrate the international crude oil price conduction path through the decomposition. This is the innovative angle of view in this article.The empirical research is divided into two parts: the first part analyzes the impact of international crude oil price influence on the domestic price level, and then inspects how the paths influence the domestic price level empirically. According to the empirical results, the first part shows the international crude oil price effect on PPI size is 0.088%, and the impact on the CPI size is 0.060%. All These effects are reflected through the various price conduction paths.Conduction path empirical uses VAR model and impulse response function to analyze the three price paths respectively, and the results show that the effect of the international crude oil price on domestic energy prices will be four months lag effect, and the biggest shock effect is that every domestic energy prices are moving 3.67% when the international crude oil prices fluctuate 1%. The impact of domestic energy prices on the transportation communication transmission consumer price index will be five months of lag effect, Biggest impact effect for domestic energy prices fluctuate every traffic communication p rice level will be moving the 1% to 0.11%.Domestic energy price fluctuations affect PPI will lag 4 months, its biggest impact effect for 1% of domestic energy prices fluctuate every cause PPI direction.The PPI impact on the CPI has six months of lag, the biggest impact effect is that CPI is made to move to 0.39% when PPI volatile 1%,The impact international crude oil price fluctuations on chemical raw materials prices of lag effect will be 5 months, whose biggest effect is that chemical raw material prices fluctuate will be 1.41% when the PPI fluctuate every 1%.C hemical raw materials prices will affect the PPI after into the production, its effect will have 6 months of lag, and its biggest effect is that will drive the PPI fluctuate 1% when chemical raw material prices fluctuate every 0.72% Finally, combining two empirical results, it is concluded that the specific role of path how the international crude oil price affect domestic price level is that :The international crude oil price affect PPI from two directions, 72% of its impact on PPI is done by energy prices. and 28% is accomplished by chemical raw material prices. International crude oil prices also affect the CPI from two directions, 78% is done by PPI, 22% is done by energy prices.Finally the research conclusions and according recommendations will be summarized in this paper.Main conclusions are: the international crude oil price fluctuations have significant influence on the domestic price level; the hypothesis of international crude oil price on domestic price level three conduction paths is valid; International crude oil price has obvious lag effect on domestic prices of conduction; The international crude oil price based on the energy price conduction effect is more significant than based on chemical raw materials; The influence of international crude oil on the domestic price level strength and a positive relationship with the length of the transmission chain..According to the research conclusion, this paper put forward suggestions from two aspects of price controls and supply and demand relations that relieve the impact of international crude oil price fluctuations on domestic prices.