Integration DATA Analysis between Chinese and the World Crude Oil Market

Ying Ma, Jing-gang Guo

Integration DATA Analysis between Chinese and the World

Crude Oil Market
Ying Ma, 2 Jing-gang Guo
1
1,
School of Economics & Management, China University of Petroleum, Qingdao ShanDong
266555, China, E-mail:my8125@163.com
School of Economics, Central University of Finance and economics, Beijing 100081, China
2,
School of Economics & Management, China University of Petroleum, Qingdao ShanDong
266555, China, E-mail: loadingusa@gmail.com

Abstract
Whether China is integrated into the world oil market not only determines the influence of the
country on the world oil market, but also represents the level of China opening its own crude oil
market, which is closely related to China's energy security. The purpose of this paper is to investigate
whether or not China is an integral part of the world oil market. Employing the EH and VAR model to
test the market boundaries and measure the integration of international and domestic crude oil market
respectively. The empirical results suggest that China is actively engaging itself in the world oil market,
but this level of integration is still weak, reflected in China's crude oil prices influenced by the world
price of crude oil acutely, but less impact on the world crude oil prices. In order to enhance national
energy security, we must establish our own crude oil futures market and accelerate the competition for
the international oil pricing power, maintaining the domestic crude oil prices relatively stable.

Keywords: Integration,the E-H Test,Impulse Response Function,Crude Oil Prices

1. Introduction

With the cont inuous increase o f t he ec onomic a ggregate, C hina has surpassed Japan t o be the
world's second-largest economy. Petroleum and its products are becoming more and more important in
the n ational e conomy and daily l ift. Chi nese oil co nsumption is ne xt to th e Uni ted States, rankin g
second in the w orld[1]. D espite surpassing Iran to be th e world's f ourth largest c rude oi l pr oducer,
China is also th e world's secon d largest crude oi l de mand count ry. D omestic crude o il prod uction
obviously cannot meet t he huge domestic de mand ( Figure 1). In 201 0 Ch ina's cr ude oil dai ly
consumption of 9,057,000 barrels/day, and the crude oil output is only 4,071,000 barrels/day. To meet
the needs of national production and economic development, china must rely on the large a mount of
crude oil imports. China's dependence on crude oil imports increased year by year. China's dependence
on crude oil i mports reached 53 .8% in 2010 , t hat is m ore than 50% which th e internationally
recognized "security cordon". These posed a serious threat to Chinese national energy security[2-3].
China is still undergoing rapid economic development. So crude oil independence is difficult to be
effectively improved in a short-term. Si mply r elying on reduce oil importing in o rder to reduce
dependency on imported practices, which is of no use to ensure China's energy security. To speed up
the c onstruction of China 's energy se curity s ystem, the g overnment i s act ively seeking
countermeasures: crude oil imports diversification, diversification of oil supply; encourage domestic oil
enterprises to go abroad , make f ull use o f Renewab le r esources; in tegration wi th the world price o f
crude oil , and act ively co mpete in i nternational cr ude oi l pricing. The positive int eraction with the
world accelerates to integrate China's crude oil market with the world crude oil market[4].
If China is a part of the world oil market, the adjustment made by the government on oil supply and
demand w ill have a sig nificant i mpact o n the world c rude oil market. With incre asing de gree of
integration, th e in fluence wi ll be g reater. On th e othe r side , Chin a wil l also b e more sensi tive t o
fluctuations in the world crude oil market[5].
This paper ha s tw o contribu tions: First, We qu alitatively s tudied the int egration between Chinese
crude o il m arket and the wo rld oi l market in three di mensions: the import p lurality, p etroleum
enterprises international cooperation and international crude oil prices. Seco nd, we s tudy the strength
of this integration from the a ngle of the market the bou ndary and prices interactive using EH test and

Advances in information Sciences and Service Sciences(AISS) 785

Volume5, Number7, April 2013
doi:10.4156/AISS.vol5.issue7.92
 Integration DATA Analysis between Chinese and the World Crude Oil Market
Ying Ma, Jing-gang Guo

vector autoregressive model. Based on the result, we put forward effective price hedging mechanisms
to enhance China's right to speak on the international oil prices[6].
The rest of this paper is structured as follows. Section2 reviews the theory about Price fluctuation
and correlation analysis and production flow analysis. Section 3 review the integration process between
China and the international crude oil market and Section 4 reports and di scusses the empirical results.
Section 5 concludes [7]

Figure 1. Chinese oil production and consumption, 1953-2009 (in million tons).

2. Overview

2.1. Price fluctuation and correlation analysis

According to Adel man[1] ( 1984), t he wo rld oil market i s “ one gr eat poo l”; a barrel from one
supplier can always be directly or indirectly replaced by a barrel from another supplier. This world oil
market hypothesis was then subject to continuous empirical scrutiny in a number of studies. The f irst
documented empirical examination of the world oil market integration (or regionalization) hypothesis
can be found in Weiner[2] (1991). Two empirical approaches were used in the study—one based on the
correlation o f price changes and the other based on t he theory of ar bitrage. The res ults from b oth
approaches indicate a high degree of market regionalization, implying that the world oi l market is far
from completely unified in t he period being studied. Following the price change correlation approach
by W einer ( 1991), a n umber of studies have at tempted to r eexamine t he hy pothesis with di fferent
datasets and more advanced ti me-series econo metric t echniques (e.g. coi ntegration and Grange r
causality).
Sauer[3] (1994) summary oil import price monthly data of the United States, Britain, Indonesia and
other 7 countries in 1980-1987, and then analyze them using multivariate time series modeling method.
He found crude oil price fluctuation trends of any country is the same with the other countries. Thus he
validating the world oil market integration this hypothesis; Ripple[4](2001) confirmed that Adelman’s
hypothesis (19 84) th rough co integration ana lysis using th e United Sta tes and Dub ai cr ude oil price s
monthly da ta as a f oundation. Based o n Wei ner’s ( 1991) arbit rage theory an alysis, K leit[5](2001)
research 7 kinds of light crude oil weekly prices data in world crude oil market, the result showed that
55% of transaction cost estimation time coefficient is negative correlation.

2.2. Production flow analysis

Elzinga and Hogarty[6] (1973) research the market boundary problem from the view of area output,
and put forward E lzinga-Hogarty test theory facing the g eographical boundaries. E-H test is to make
market boundary region partition based on input consumption minimization (LIFO) and output supply
minimization (LOFI ). If more than 75% income come from their production or more than 75% output

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by local consumption in the target area, it indicate that the target market has regional attribute. Due to
the 75% threshold va lue setting does n ot have the theo retical basis and also the model does not take
into account the potential competition and other factors, the E-H test has been questioned. Elzinga and
Hogarty[7] (1984) improved the original model. On the basis of economic theory, he respectively set
90% an d 75% as t he market boundary strengt h cri terion. Because th e i mproved model has act ual
maneuverability, so E- G inspec tion becomes the c ommonly used t est methods to define market
boundary.
Chinese scholars always research the integration of the domestic crude oil market with the world oil
market from the macroeconomic v iew of international cr ude o il p rices impact t he C hinese crude o il
price. After analyzing th e relationship between Daqing crude oil price and Brent crude oil price tr end
and fluctuation, Jiao Jianling [8] (2004) found that Brent crude oil price have rapid and long effect to
Daqing crude oil price. On the ot her han d, the price of Daqing e ffects less to Brent crude oi l price.
Through analyzing domestic crude oil and the world crude oil price sample data from Jan 2001 to Dec
2006, Zhang Yixiang [9] (2007) got the same conclusion. Based o n the monthly data of January 2003
to February 2 009, Liu Jia n [10] (200 9) analy ze h ow t he WTI price f luctuation i mpact on Ch inese
macroeconomic usin g str uctural vect or au to regres sion model. The r esults sho wed the int ernational
crude oil price fluctuation ha s strong p ersistence impact o n Chi na's economic. The inte rnational oil
price shock will not only directly leads to decreased total output and inflation but also indirectly affect
output associating action prompted tight monetary policy[11].
Above al l, f oreign scholars fo cus on t he wo rld oi l market in tegration, but they alw ays make
empirical a nalysis except Chinese crude oil market sample; on the o ther s ide, there wer e no Chinese
scholars to discuss the integration issue between China and world crude oil market before. This article
try to research this issue through combining qualitative and quantitative research methods[12].

3. The integration process between China and the international crude oil market

3.1. Imports diversification and deal more with the world

From 2005 to 201 0, China’ s dep endence on foreign oi l were 42.9 %, 4 7%, 50.5 %, 51.3 %, 53%,
53.8%, every year increase 2 percentage points. In 2011, it’s the first time to exceed the United States
and reach 56.3%. A large number of Chinese crude oil is from the Middle East but the United States is
from other relati vely s table regions[14], e.g. t he Gu lf of Mex ico, Can ada, Beihai. Depen dence o n
foreign oil constantly i mproves. It means that China's social production and energy security situation
will be even more severe. Therefore we said Chinese energy security challenges more than the United
States far[15]. Oil imports diver sity s trategy for China is the e ffective means to avoid the risk of oil
supply. For b etter i mplementation t his im ports diversity strateg y, i nteraction b etween Chi na and
international crude oil market should be more and more frequent.
As seen from the charts, China's crude oil import source countries cover Middle East, North Africa,
Asia, Western hemisphere and so on. Since 2003, China's crude oil imports countries are more than 40.
It means China is accelerating to contact with the world in the suppl y of crude oil. The Indonesia and
other Asian oil- producing domestic oil quantity decreased gradually these years; Therefore China also
is being actively adjusted import source an d gradually turning to Ang ola, Russia and other e merging
petroleum countries[15].
When discussing the plurality of i mport system, we usually express import concentration with the
proportion that C3 (top three) and C5 (top 5) acco unted for the overall [11]. From Figure 2, we found
that C3 and C5 changes little after 1999, it means China oil import source is broad, but concentration is
still relat ively high. The oil imported gravity change i nterval f rom the Mid dle East i n 1999-2010 of
China is from 44.6% to 56.2%, the crude oil imports from that region of China's take quite large share.
But the Middle East is the world's one of the most volatile regions, for example turmoil in Libya, Syria
civil unrest continued, Iran nuclear crisis, Egyptian riot and other Middle East crisis. All of these pose a
serious threat to Chi na’s energy securit y. In r ecent y ears [12 ], th e r elationship b etween China and
Africa is more s table and West cr ude oil have price and freight ad vantages, all of th ese makes the
proportion of the region in China's crude oil imports rising.

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Based on abo ve analys is, w e f ound Ch ina’s imports d iversification degree is s till l ow, crude oi l
import coun try and area a re still sing le. So the abil ity to avoi d the risk of oil sup plies need s t o be
strengthened. It means we must exten d the con tact with all over the wo rld and i ncrease oi l sup ply
reliability, that will has a positive effect to accelerate the world oil market integration.

Figure 2.Chinese crude oil import concentration

3.2. Petroleum enterprise internationalization

Petroleum enterprise internationalization level is important indicators for the integration of Chinese
and t he int ernational cr ude oil market. Ch ina activ ely im plement the oi l enterprises "going abroad”
strategy, this is not only opened up the market for the Chinese petroleum industry, and also played a
safeguarding role in the national oil security strategic.
From 1993, China change from crude oil export country into a net importer. For the target to satisfy
national eco nomy long-term development interest, Chinese p etroleum in dustry implement “Based o n
domestic, extend oversea market, execute internationalization” strategy [13]. In March 1993, Chinese
Petroleum Corporation got the Mining Services operation right of Peru Talara oilfield zone 7 project; it
is the fi rst step to go abroad. Then Chin ese petroleum industry vi gorously explores the int ernational
market and share overseas oil resources and has made remarkable achievements.
From 1997 to 1999, Country-owned petroleum enterprises have their own business in the main oil-
producing countries such as Venezuela, Nigeria, Kuwait, Kazakhstan and Egypt, even in Iran and Iraq
where political factors are more sensitive. And then they gradually formed an industry chain in five oil
and gas cooperation areas, such as Africa, Asia, South America, the Middle East and Asia Pacific.
In 20 00, China National Pet roleum Corp (CNPC) and Chi na Pet roleum an d Chemical
Corporation(Sinopec), two state-owned oil companies, have been listed and recombined in Hong Kong
and New Yo rk, th ey recovery from the cap ital to th e in vestment. China Na tional O ffshore Oil
Corporation ( CNOOC) also gradually ad vance list ing schedu le. Chin a petroleum industry’s
internationalization management s trategy g radually ch anges f rom "indoors “ to " going ov erseas ". In
2001 three major oil co mpanies act ively im plement t he “going o verseas" strategy , a nd ext ensively
carry o ut in ternational oper ations. Chinese oi l finish n ew ov erseas coop eration projects up t o 0.81
billion dollars and enhanced strategic co operation wit h shell , Exxo n and oth er l arge int ernational
petroleum companies; China National Offshore Oil Corporation and has signed the contract agreement
with 18 countries and 150 oil companies. [14]

3.3. The price integration with international standards of crude oil, and further
strengthen the international crude oil market

Before the r eform o f oil price in 19 98, cr ude oi l pr ice in Chin a from the f actory to the retail are
priced by gov ernment. I n 1 998 June the former Sta te Devel opment Plann ing Co mmission iss ued a
“crude oil refined oil price reform program ", which determined the provisi ons of the domestic crude
oil price should be in accordance with Singapore market oil price. It means the major reform on crude

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oil price and the price of crude oil break away the mode to be decided only by the government but by
the in ternational market.[15] The price reform pri nciples ar e: th e cost of do mestic o nshore crude oil
production should roughly be equal with the cost of importing crude.
The their settlement price of domestic crude oil purchase and sale (do not contain tax) = crude oil
benchmark prices + premium
Crude oil benc hmark prices: it is decid ed b y Nati onal development pla nning Committee refers to
the price of near FOB and customs crude oil.
Premium: After co nsultation, expe nses t hat t he buyer an d seller shou ld a fford w ere d etermined
according to the raw oil fees, domestic and foreign oil quality price and market demand and so on.
The domestic cr ude oil can be di vided in to four kinds: l ight o il, Medi um oi l Ⅰ, Medium oil Ⅱ,
heavy oil. Table 1 are specific reference standard.

Table 1. The situation of Chinese crude oil classification and the international oil price reference
Crude oil categories Crude oil name Price reference
light oil Kirk Asia, Turpan-Hami, Yanan, Tower 1, Maling Tapis(Malaysia)
Medium oilⅠ Changqing, Liaohe, Karamay, Central Plains, Daqing Minas ( Indonesian )
Medium oilⅡ Liaohe, Dagang, estuary, victory, Jiangsu, North China Cinta ( Indonesian )
Ning, Jianghan,, South China Sea, Inner Mongolia
heavy oil Dury ( Indonesian )
ErLian.

4. Production flow analysis

4.1. Model selection

Elzinga and Hogharty [7] ( 1984) proposed the regional market division model based on output flow
to define regional market boundary using LIFO and LOFI. All of these divisions to regional market is
not only in conformity with the economic significance, but also ensure data maneuverability
LIFO ( Little In Fr om Outside ) is input consu mption minimization and de fine market boundaries
from demand angle: if pr oportion o f imported produ cts consumption i n the target market is less, it
means that the target market boundary relatively clear; LOFI ( Little Out From Inside ) is output supply
minimization and de fine market limit from the an gle of s upply: i f user con tribution in the ex ternal
market is s maller in all business income of the target market, it means that the target market boundary
is relatively clear. The calculation formula is as below:
LOFI = (production - exports) / Total
LIFO = (production - exports) / (production – exports + imports)
Elzinga an d Hog arty classified the market boundary to be tw o degrees:" s trong" and "weak ": if
threshold levels greater than 0.9 indicates that the market is a clear boundary and the target market has
a strong regional; when the threshold level is lower than 0.75 market boundary is fuzzy and the target
market and regional and international market integration is more significant.

4.1.1. Data processing

According t o LIFO and LOFI standards, when t he total prop ortion of crude oil i mports in t he
domestic crud e oil co nsumption and t he p roportion o f c rude oil expo rts in do mestic crud e oil a re
smaller, then we can found that Chinese crude oil market are more regional. When LIFO and LOFI are
all over the threshold level of 0.9, China's crude oil market in the world oil market will be relatively
independent. The result is in Table 2:

Table 2. The test results of Elzinga - Hogarty

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
LIFO 0.95 0.91 0.89 0.91 0.88 0.86 0.80 0.84 0.81 0.68
LOFI 0.84 0.85 0.87 0.87 0.87 0.87 0.88 0.90 0.95 0.94
Year 2001 2002 2 003 2004 2005 2006 2007 2008 2009 2010
LIFO 0.72 0.70 0.64 0.58 0.58 0.55 0.53 0.51 0.47 0.45
LOFI 0.95 0.96 0.95 0.97 0.96 0.97 0.98 0.98 0.97 0.98
*Data Sources: data summary of “international oil economy “over the years

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4.1.2. Analysis of the results

From th e beginning of 1999, th e value o f LIFO pr esents the tr end o f decr easing y ear by year. It
means Ch ina consumption incr eases gradually on i mported crude oil. With the rapid d evelopment of
domestic ec onomy, t he ene rgy de mand i s i ncreasing, t he do mestic cr ude oi l outpu t canno t satis fy
domestic requ irement. The s tate begins to increase cr ude oil imports to meet the need o f the
development of i ndustrial ec onomy. The val ue o f LOFI is maintained all t he ti me a bove 0 .9 th at
indicate China's crude oil export share i s very small, which is mainly due to their lack of capacity in
domestic crud e oil. From the beginning of 2004, they i mplement “strict out w ide i nto “policy o f the
import and ex port of cr ude oil, crude oi l export r estriction po licy comes on stage in succession , this
leading to the amount of crude oil exports dropped year by year.
According to E-H test, Chinese oil market is progressively opened after 1999. Oil imports increased
year by year, China's crude o il market regional ch aracteristics disappeared and gr adually int egrated
with the world oil market.

4.2. Price correlation analysis

4.2.1. Data and sample selection

For the target to r esearch the r elationship between Chinese crude oil price and international crude
oil price, this paper selects m ultiple regions of the cr ude oil price (see Table). Before 1998, crude oil
price in China is decided by t he government, data does not have the significance. This paper selected
the data from 1999 January to July 2011 as samples.

Table 3. Sample selection basis and source

Variable set
Name Selection of basis Source
DaQing(dq) Crude oil production accounted for more than 40% of the total The United States
output of onshore oil Energy Information
Brent(blt) 80% international oil is traded to Brent crude benchmark Administration
West Texas light The United States is the world's largest oil import country and www.eia.doe.gov
crude oil (wti) consumptive country. In view of its global military and
economic power, WTI has become a global crude oil pricing
benchmark
Tapis(tps) the price of domestic light crude oil prices conforms with it
Minas(mns) the price of medium oil Ⅰ conforms with it International Petroleum
Economics
Sinta(xt) the price of medium oil Ⅱ conforms with it
Dubai(db) half of the domestic oil are imported from the Middle East

4.2.2. Data processing

1) Stationary test
Stationary test is to check if the inv estigated r esearch related pr operties of ti me s eries chang es as
time changes. Before the ins pection variables have long-term integration relationship, it usually needs
to test stationary for variable sequences. This paper chooses ADF unit root test and PP test to confirm
the sequence of smooth. The test results are shown in Table 4.
Table 4. The variables test results of ADF test and PP test
Variable ADF test PP test
Levels 1st difference Levels 1st difference
dq -1.412161 -7.671745** -1.215353 -7.718280**
blt -1.346835 -8.084380** -1.183352 -8.115704**
wti -1.810014 -7.908353** -1.656938 -7.947206**
tps -1.536609 -7.476867** -1.226006 -7.519849**
mns -1.316555 -7.997416** -1.148460 -7.946597**
xt -1.275024 -7.806940** -1.107630 -7.935703**
db -1.546790 -7.153695** -1.207313 -7.261151**
Note: * * stand for passing 1% significance level test.

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2) Cointegration test
If China is a part of th e w orld crude o il market, D aqing crud e o il prices sho uld have a long-term
cointegration with the wo rld cr ude oil price. Becau se t his s tudy is co integration relationship among
more t han two variables, we use EG two -step testing method to do the co integration test variables.
Concrete results are shown in Table 5.

Table 5. The cointegration test results between Daqing crude oil prices and the world crude oil prices
Variables Constant coefficients Residualtest unit root T Threshold cointegration
blt 0.071916 1.014267 -7.455056** -2.880853 Yes
wti 3.808580 0.954749 -2.307273* -1.942967 Yes
tps -0.147326 1.078234 -5.140827** -2.880722 Yes
DaQing
mns -1.076493 1.054720 -4.503812** -2.880722 Yes
xt -0.217331 0.989201 -4.715224** -2.880722 Yes
db -1.032261 0.984431 -4.694784** -2.880722 Yes
Note: ** stands for passing through the 1% significant level test
* stands for passing through the 5% significance level test

3) Granger causality test

EG coint egration tests show that the exi stence of a lo ng-term dyna mic equ ilibrium relationship
between t he d omestic crude oil prices and int ernational c rude oil prices, but it cannot prove a causal
relationship between the variables. Granger causality test can reflect the relationship between variables.
According to Schwarz (SC), Akaike (AIC) minimization criteria for selecting the lags number, we can
get the result as shown in th e f ollowing t able using G ranger causality t est to stud y the causal
relationship of domestic crude oil prices and international crude oil prices.

Table 6. Grainger causality test results for the crude oil price of Daqing and world crude oil prices
The original hypothesis Lag F- statistics Significance Conclusion
period probability
DQ is not a Grainger reason for BLT 2.68033 0.0493 Refuse
4
BLT is not a Grainger reason for DQ 3.91752 0.0101 Refuse
DQ is not a Grainger reason for WTI 2.16971 0.1429 Accept
1
WTI is not a Grainger reason for DQ 5.06780 0.0259 Refuse
DQ is not a Grainger reason for TPS 1.95801 0.1043 Accept
TPS is not a Grainger reason for DQ 2.50248 0.0452 Refuse
4
DQ is not a Grainger reason for MNS 6.73780 0.0003 Refuse
MNS is not a Grainger reason for DQ 3.03377 0.0313 Refuse
DQ is not a Grainger reason for XT 4.50423 0.0019 Refuse
XT is not a Grainger reason for DQ 7.98720 0.0001 Refuse
3
DQ is not a Grainger reason for DB 0.71108 0.5469 Accept
DB is not a Grainger reason for DQ 4.48507 0.0049 Refuse

Through cointegration test and Granger causality analysis for the long-run equilibrium relationship
examination of d omestic cr ude oil pr ices and in ternational crude o il prices, th ere a re s ome mutual
influence between international crude oil prices and do mestic cr ude o il p rices. C hina's crude oil
imports and consumption is huge, so it have decisive impact on the international crude oil prices in the
procurement and tradin g acti vities o f the inter national cr ude oil market. So Daqin g cr ude prices are
Granger reason f or Br ent, Minas and Cint a crude oil prices. But Daqing and Brent s ignificant
probability is closed to 0.5, the effect of this influence is very low. The only cause is because Chinese
crude oil cost is huge. D aqing does not constitute Grang er r eason to Dub ai cr ude oi l prices, that is
because he can only passively accept when the Middle East crude oil prices increase. The Middle East
accounts for about 50% of China's total crude oil imports, lack of bargaining power of China's crude oil
import cause the loss of foreign exchange.
4 )Pulses corresponding function
to examine the degree of interaction between Daqing crude oil prices and the international crude oil
prices, this paper use of the generalized impulse response function for dynamic simulation of crude oil
prices on the domestic and international crude oil prices. Then we analyze the interaction mechanism
between th e c rude oil prices and i ndicate the d ifference bet ween th e dy namic e ffects. Gen eralized

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impulse r esponse function is used to measure when t he t ime s eries to r eceive one s tandard deviation
from the random disturbance impact endogenous variable current and future value of a function of the
changes; it re flects th e "n ew inf ormation" dynamic eff ects on t ime series in the cru de o il market.
Figure 3 is used to show the pulse corresponding summary graph of world crude oil prices and Daqing
crude oil prices.

Figure 3. The impulse responses of Daqing crude oil price and the price of world crude oil
Through i mpulse r esponse figure, we f ound t hat th e international crude oil p rice ch anges in the
current period are very small while Daqing crude oil prices fluctuate. It will reach its maximum in the
third perio d ( about 1) and t his ef fect d isappears in the fourth ti me; Wh en the international crude o il
price fluctuate, Daqing crude oil prices current shows strong fluctuations (about 6), and this effect have
long duration until 7th period. It is consistent with the previous analysis, of the international crude oil
price flu ctuations hav e rapid and lon g-term impact o n the price of crude oil in Ch ina, the i mpact of
changes in oil prices on the international crude oil prices is relatively slow and short.
Although the United States is not a country of China's crude oil imports, but WTI price still cause
volatility China Daqing crude oil price. The United States is the world's largest oil-importing countries
and co nsumer cou ntries. by v irtue o f its str ong eco nomic and military str ength, W TI c rude oi l ha s
become the gl obal be nchmark for crude oil pric ing, which has important re ference f or Ch ina to
compete th e i nternational c rude oil pricing. Chi na an d th e Unit ed St ates ar e o il i mports and
consumption country, and th e global eco nomic crisis h ighlights the st atus o f Chi na in the glo bal
economy; the situation in the Middle East give china more right to speak in the negotiations with other
oil-producing crude oil cou ntry, whi ch cr eate a great opp ortunity fo r chi na to break t he th e price of
crude oil monopoly of the United States and other developed countries,.

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With r eference to th e pr actice o f the Unite d Stat es and o ther d eveloped cou ntries, china should
strengthen cooperation with other countries to seize the o pportunity to a ccelerate the es tablishment of
China's own crude oil price system, and enhance the bargaining power of China's crude oil pricing.

5. Conclusions
In the different view of crude oil imports diversification, the oil company’s internationalization, we
research the i ntegration of the world cr ude oil market and Chi nese crude oil market. China is
increasingly active in the international crude oil market, it has setup a network of crude oil supply and
demand with more than 40 countries and regions; The footprint of the China oil companies has spread
across more t han 30 c ountries and regi ons. It al so has establ ished long-term s trategic p artnership
between the British oil company BP, Ro yal Dutch Shell Group and other international oil companies;
under government guidance, China achieves integration with the international crude oil market. All of
these show that China is increasingly integrated into the international crude oil market.

6. Acknowledgements.
The author took charge of the subject belonging to ShanDong Province Natural Science Foundation,
Project nu mber: ZR2 011FL024, ZR201 2GL07, and also sup ported by “ the Fun damental Research
Funds for the Central Universities (11CX04055A, ZR2009GM010, 11CX04023B), and, the integration
of infor mation te chnology a nd in dustrialization of special research topic f or Shandong Province
(2012EI108).

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Ying Ma, Jing-gang Guo

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