Global oil prices may see drastic fluctuations

According to research findings released by the Chinese Academy of Social Sciences, global oil prices will fluctuate around the benchmark scope of 79 U.S. dollars to 90 U.S. dollars in 2012. The oil prices will usually return this interval after a single deviation unless a significant permanent change in the world's economic and political structure occurs, according to the academy. Domestic demand for oil is increasing year by year due to the vigorous development of China’s economy. However, domestic oil production is not keeping up with the increasing demands and is even stagnating. Therefore, China has to rely on crude oil imports to meet its demands. The ratio of dependence on foreign crude oil import was above 50 percent in 2009 and will probably reach 55 percent this year. According to this research, global crude oil prices will be subject to the following factors in 2012: political configuration in the Middle East, the E.U. debt crisis, economic downturn in the United States and the prospects of emerging economies. The political changes in the Middle East, the world's oil depot, will undoubtedly affect oil prices. Although the Libyan war has ended, it is still unknown whether the domino effect from the unrest will end in this area. As to global crude oil prices, the increasingly fierce E.U. debt crisis must affect oil demand. The prices may go down further if the risks in finance spread to economic entities, causing the downturn of the European economy and slowing the pace of the global economic recovery.The United States remains the world's leading player. Its pricing in U.S. dollars has further put international crude oil under the thumb of the economic situation and policy of the United States, which shows us a self-regulating ability higher than that of Europe in spite of series impacts from credit rating downgrade to high unemployment. The Federal Reserve may introduce new similar quantitative easing policies to expand its money flow in 2012. However, the United States may not make a big impact on oil prices under lower pressure of dollar devaluation and minor possibility of economic growth surprises. Emerging economies present a good economic trend amid inflation in 2011 — especially China and India. Both countries have maintained very high economic growth rates and are important driving forces for international economic growth. Now, China and India still show a powerful economic growth inertia which will enable a relatively high growth speed in 2012. For global oil prices, an active demand from such emerging economies for crude oil will boost the oil market. However, the oil prices will not be as low as that of early 2009. According to this research, crude oil prices may have larger drastic fluctuations in 2012 compared with 2010, as driven by political and economic uncertainties. Whether it will reach peak or bottom depends on the occurrence of breaking incidents concerning international political and economic trends, such as the breakout of a new round of The Middle East war or sudden changes in the euro zone. For China, oil production should continue to maintain a relatively stable level. Due to economic slowdown, crude oil imports may increase at a lower rate. But the ratio of dependence on imports will also continue to rise to 56 percent, with an import volume of more than 250 million tons in 2012. The key contradiction in oil production and marketing will remain a hot potato in the short term and remains a controversial issue in 2012 because of multi-stakeholder entanglements and the complexity of the matter, notwithstanding an imperative adjustment to the pricing mechanism.