Does China factor matter? An econometric analysis of international crude oil prices
Whether China’s crude oil imports are the culprit of oil price volatility these years has not been quantitatively confirmed. Therefore, this paper empirically investigates the role of China’s crude oil net imports in Brent price changes from October 2005 to November 2013 based on an econometric analysis. The results indicate that, during the sample period, China’s crude oil imports do not significantly affect Brent price changes, no matter in the long run or short run. Therefore, the blame for China’s crude oil imports to cause the dramatic fluctuations of international oil price has no solid evidence. Also, there exists significant uni-directional causality running from the Brent price to China׳s crude oil imports at the 5% level. Besides, the response of the Brent price to China׳s crude oil imports is found positive but slight, and the Brent price responds more significantly to US dollar exchange rate and OECD commercial inventory than to China’s crude oil imports in the short run. Finally, the contribution of China׳s crude oil imports to Brent price movement is about 10%, which is less than that of US dollar exchange rate but larger than that of Indian crude oil imports or OECD commercial inventory.
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