Title Page
ABSTRACT
Contents
I. INTRODUCTION 16
1. BACKGROUND AND RESEARCH PURPOSE 16
A) BACKGROUND 16
B) RESEARCH PURPOSE 20
2. RESEARCH SIGNIFICANCE 22
A) THEORETICAL SIGNIFICANCE 22
B) PRACTICAL SIGNIFICANCE 24
3. RESEARCH METHODOLOGY 25
4. THESIS OUTLOOK 26
II. LITERATURE REVIEW 28
1. GENERAL THEORY 28
2. RELATED RESEARCH AT ABROAD 31
3. RELATED RESEARCH IN CHINA 34
III. INTERNATIONAL CRUDE OIL AND MARKET 37
1. OVERVIEW OF INTERNATIONAL CRUDE OIL 37
A) DEVELOPMENT OF INTERNATIONAL CRUDE OIL MARKET 37
B) FORMATION AND IMPROVEMENT 38
C) INTERNAL STABILITY MECHANISM 44
2. DISTRIBUTION OF WORLD OIL RESOURCES 49
A) DISTRIBUTION OF RESERVES BY REGION 50
B) DISTRIBUTION OF OIL RESERVES BY FIELD 54
C) WORLD OIL PRODUCTION AND DISTRIBUTION 55
D) STATUS QUO OF WORLD OIL CONSUMPTION 60
3. PRICING MECHANISM OF INTERNATIONAL CRUDE OIL 62
A) STAGE 1: EARLY DEVELOPMENT 62
B) STAGE 2: ANGLO-AMERICAN OLIGOPOLY PRICING 64
C) STAGE 3: GAME OF CRUDE OIL PRICING MECHANISM 66
D) FUTURES PRICING 67
4. DEVELOPMENTS OF INTERNATIONAL CRUDE OIL PRICES 70
A) BEFORE FOUNDATION OF OPEC 70
B) IN 1960S-1980S 70
C) IN 1980S-1990S 71
D) IN THE 1990S 73
E) THE 21ST CENTURY 74
IV. AN OVERVIEW OF CHINESE ECONOMY 76
1. THE DEMAND OF CHINA FOR OIL 76
2. THE SOURCE OF CHINA'S OIL 79
3. THE STATUS QUO OF CHINA'S IMPORTED OIL 82
V. DATA ANALYSIS AND METHODOLOGY 87
1. PRELIMINARY DATA ANALYSIS 87
A) TIME SERIES PROPERTIES OF THE VARIABLES 87
B) UNIT ROOT TEST AND STATIONARITY 89
C) COINTEGRATION TESTS AND LONG RUN EQUILIBRIUM 92
D) GRANGER CAUSALITY TESTS 95
2. VAR MODEL AND VAR-ECM MODEL 98
A) MODEL SPECIFICATIONS 98
B) IMPULSE RESPONSE FUNCTION 101
C) VARIANCE DECOMPOSITION 103
VI. EMPIRICAL RESULTS AND DISCUSSION 106
1. VAR AND VAR-ECM ANALYSIS 106
A) ESTIMATED RESULTS 106
B) IMPULSE RESPONSE FUNCTION 112
C) VARIANCE DECOMPOSITION ANALYSIS 117
2. POLICY IMPILICATION FROM THE EMPIRICAL RESULTS 120
VII. CONCLUSIONS AND POLICY RECOMMENDATIONS 124
1. CONCLUSION 124
2. POLICY RECOMMENDATIONS 128
REFERENCES 131
REFERENCES FROM VARIOUS WEB SOURCES 138
Table 2.1. World oil reserves and ranking by country 53
Table 2.2. Oil output data 59
Table 4.1. Crude oil production 81
Table 4.2. Top 15 countries/regions that imported crude oil to China in 2018 85
Table 5.1. Time Series Descriptive Statistics 88
Table 5.2. Unit Root Test Results 91
Table 5.3. Results of Cointegration Test 94
Table 5.4. Results of Granger Causality Test 97
Table 6.1. Results of Optimal Lag Order Selection for the VAR Model 107
Table 6.2. Parameter Estimation Results of VAR Model 108
Table 6.3. Parameter Estimation Results of VEC Model 109
Table 6.4. (A) CPI Variance Decomposition Results 119
Table 6.4. (B) PPI Variance Decomposition Results 119
Table 6.4. (C) PMI Variance Decomposition Results 120
Figure 1.1. Petroleum Product 18
Figure 1.2. Industrial end-use oil consumption 21
Figure 2.1. Proven petroleum reserves 37
Figure 2.2. World's Oil Reserves 51
Figure 2.3. Where are the world's oil reserves? 54
Figure 2.4. World Oil Production 56
Figure 2.5. World Oil Consumption 61
Figure 3.1. Process of trading in the futures market 65
Figure 3.2. Historical Brent crude price 69
Figure 3.3. Historical WTI Crude Price 72
Figure 3.4. Oil consumption 75
Figure 4.1. China's dependence on oil 77
Figure 4.2. Oil consumption and production 78
Figure 4.3. Imports and Domestic 80
Figure 4.4. 2011 Oil import share 82
Figure 4.5. China monthly crude oil imports by source 84
Figure 6.1. AR Root Test Results of VAR Model 111
Figure 6.2. AR Root Test Results of VEC Model 111
Figure 6.3. CPI Response to Price Shocks from WTI Crude Oil (VAR) 113
Figure 6.4. CPI Response to Price Shocks from WTI Crude Oil (VEC) 114
Figure 6.5. PPI Response to Price Shocks from WTI Crude Oil (VAR) 115
Figure 6.6. PPI Response to Price Shocks from WTI Crude Oil (VEC) 115
Figure 6.7. PMI Response to Price Shocks from WTI Crude Oil (VAR) 116
Figure 6.8. PMI Response to Price Shocks from WTI Crude Oil (VEC) 116