Construction of China's Petroleum Financial System: Strategic Option to Address Oil Security of China

At present time,China has been in the key phase of industrialization. As life-blood of industry,petroleum has come into being strategic resources,which concerns the whole situation.A investigating situation of oil markets showed the consumption and demand of petroleum in China increased largely in 2004.On the other hand,the oil on international markets also increased largely, pushing the cost of import of China.Calculate at average price,China paid additional bill nearly to the amount of 90×10~8$ for the oil import.Because of the pricing mechanism,the oil in domestic markets did not reflect the factors of demand and supply in china.The pricing of domestic petroleum markets was just trace the change of the in international oil markets passively,and China could not exert any pricing power correspond to her position of the second biggest country in oil consumption and demand.Moreover,by reason of the delay of adjustment,some strange phenomena such as suspending between wholesale and retail price appeared in the product oil markets in China.Considering only domestic resources in China,there is a great shortage of supply of petroleum.Taking the worldwide resources into consideration,however,there is no shortage.If we have foreign exchange enough,there is no risk of supply interruption.Therefore the critical issue of Chinese oil security is not the interruption in supply,but the risk in the oil markets,that is to say the key is cost to spend to buy oil from the international oil markets.In modern international economy,the relation between finance and oil is tighter and tighter.Oil futures markets have become an essential part of the whole oil markets and futures prices are the most important pricing benchmark in international oil markets.To ensure Chinese oil security,this paper suggests it is argent for China to take the construction of petroleum financial system as state strategy,as to win and strengthen pricing power,to arbitrage risk,and to maintain sustained economic development of China.Therefore,China should draw financial policy concerned petroleum,set up development fund for oil industry,and promote the development of oil derivatives markets.