The effects of fluctuation of oil prices on related industries

With China´s rapid economic development, the oil as a strategic resource has become increasingly important. As a source of industry, the volatility of oil price affects the interests of many downstream industries, so studying of the effects of volatility of oil price on the cost and profit of related industries is particularly important. This paper studies the Granger causality of the domestic oil price fluctuations and four industries of oil processing, coking, chemical materials and chemical manufacturing, transportation and medical´s cost-profit ratio, then uses the cointegration and error correction model to analyze whether they have long-run equilibrium relationship and describe the short-term fluctuations. We will find that the effects of fluctuation of crude oil price are more significant to the industries in the top of the industry chain.