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The recent slump in oil prices has had a big impact on global markets. The fundamentals that affect oil prices - a supply glut and the strengthening dollar - remain unchanged. That means oil prices will continue to face pressure. The wild volatility of oil prices is mainly due to market speculation, as well as expectations for weak growth of the global economy. In fact, the problem of oversupply in the global coal market is much more serious than the unbalanced supply in the oil market, but coal prices do not fluctuate as violently as those of oil. That is because the oil market is more dynamic, and more prone to speculation. The gloomy expectations for the global economy, especially for emerging markets, may cause oil prices to fall further. But the deep fall in oil prices means they could rebound sharply later.          

The current price of around $30 per barrel is not likely to persist for long given the cost pressure on major oil producers. Globally, demand for oil may continue to rise slightly. But on the supply side, with producers set to cut investment significantly and a looming wave of bankruptcies among oil-related companies, oil supply will fall in the future. Once the market generally expects a new balance in oil supply and demand to take place, oil prices may return to around $50 per barrel, possibly later in the year. 

Given the current circumstances, the impact of China on global markets should not be underestimated. As well as being the second-largest economy in the word, China influences the global market due to the scale of its demand and demand dynamics. China produces and consumes nearly 50 percent of the world's coal, steel and cement and used to account for 40-60 percent of the total increase in global demand, so the market is understandably concerned about possible changes in energy demand in China. China's oil consumption accounts for between 11 and 12 percent of the world's total, and its oil imports remain strong. The country imported 340 million tons of crude oil in 2015, up 8.8 percent year-on-year, a new high. But the import value dropped 40.5 percent from a year ago to stand at 833.28 billion yuan ($126.71 billion). As the world's largest oil importer, China is one of the countries that benefits the most from low oil prices. Given the current import volume, China could save 1.1 trillion yuan in a year, equivalent to 10 percent of the country's annual tax revenue or around 1,100 billion yuan, given that oil prices have dropped to $27 per barrel.     

The decline in oil prices is generally good for China. But wild swings in oil prices, and a possible price rise in the future, could have a big negative impact on the country's economy.  

One of the strategies to offset the impact of wild fluctuations in oil prices is to increase the country's oil reserves. The Chinese government plans to build up strategic oil reserves equivalent to 90 days' worth of net import demand by 2020. Fortunately for China, the country can increase reserves substantially when the prices are low. Although currently there are not enough facilities for strategic oil reserves in China, the country is likely to build the necessary facilities by 2020 if the low prices persist. 

Moreover, as over 50 percent of China's oil imports come from countries in the Middle East, China could take the opportunity to diversify its oil imports in a buyer's market. For example, it could increase imports from Russia. Official data also points to such trends. China's imports of crude oil from Russia reached 3.9 million tons in November 2015, a rise of 18 percent year-on-year, while imports from Saudi Arabia dropped 8.6 percent to 3.6 million tons.    

However, China's dependence on oil imports will still continue to rise considerably. The real solution to avoiding side effects from oil price swings in the international market is to find alternative energy sources. Looking ahead, options that could help push down oil prices are not shale oil but new energies such as solar power, energy storage technology and technological breakthroughs in electric cars. The bottleneck affecting development of new energy and electric cars is energy storage technology, so development in this area is vital. 

Stability in the Middle East is also a key factor in the current low oil prices. If an OPEC member needs to shrink fiscal expenditures due to the low prices, it could lead to social chaos and then wider geopolitical strife. Geopolitics can always have a sudden impact on oil prices. Therefore, Chinese policymakers should keep a close eye on the situation and get involved in maintaining stability in the Middle East.
来源:《Global Times》
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林伯强

林伯强

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美国加利福尼亚大学经济学博士(Santa Barbara)。现任闽江学院新华都商学院副院长、厦门大学中国能源经济研究中心主任、博士生导师、2008年教育部“长江学者”特聘教授,主要研究和教学方向为能源经济学。

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