The fall in international oil prices had appeared to have bottomed out in the last few months, but they fell back to around $40 per barrel after the ban on oil exports by Iran was lifted. Everyone in the international oil market needs to adjust their previous optimistic expectations for a recovery in oil prices and reassess the situation. What impact will the lower oil prices have on China?

The prices will have an effect on China's economy. On a macroeconomic level, it will help reduce industrial costs for the country's manufacturing sector and therefore spur economic development. China's dependence on imported oil exceeds 60 percent and the country is expected to save hundreds of billions of dollars every year thanks to the decline in oil prices.

It will also help reduce the cost of increasing China's strategic petroleum reserves and promote overseas investment as well as international cooperation in the energy sector. Also, since the prices of oil products in China are linked with international oil prices, crude oil produced in China can only be sold at the international oil price. This will certainly erode profits for Chinese oil companies, but will also benefit downstream industries by reducing their costs.

Lower oil prices will also be beneficial for China's energy reform. There are two main prerequisites for the country's energy reform, especially for resource pricing reform. One is the need for an adequate energy supply, because at a time of shortages, the priority is always to increase the energy supply, rather than improve energy efficiency through reform.

The second prerequisite is stable or downward energy prices, given that the biggest obstacle for reform is the possibility of price hikes after the reform, which would perhaps have some impact on economic development and social stability. Implementing energy reforms at a time when the prices are at a lower level will help minimize the negative effects.

Will the lower oil prices hinder the development of new energy? In fact, it will have only a limited impact on the development of China's wind power and solar energy sectors, given that the benchmark price for wind power and solar energy is settled by the government based on production costs.

And it is unlikely this will be adjusted due to oil price fluctuations. Besides, the government will continue to encourage the development of clean energy to meet its target of raising the proportion of clean energy consumption to 15 percent of the total energy mix by the end of 2020.

Lower oil prices are likely to hinder the development of unconventional oil and gas resources. If the international oil price remains at around $40 per barrel, the price of natural gas could fall significantly in the period ahead. The falling profitability of unconventional oil and gas may become the primary obstacle to attract new investment into these areas and the technological progress with shale gas extraction may also slowdown.

An oil price of $40 per barrel is far beyond the competitive capacity of most US shale gas enterprises and shale gas exploitation in China will no longer be profitable. Investment in China's shale gas industry is expected to slow down unless investors are confident about potential oil price rises in the future.

Lower oil prices will perhaps have some impact on the supply and demand structure in the global energy market, as well as influencing geopolitics. Some shale gas enterprises in the US may go bankrupt if the international oil price remains at $40 per barrel for a long time and therefore leads to a decline in shale oil output.

Also, given that lower oil prices may spur greater energy consumption, the US is expected to raise its oil imports and therefore weaken its energy independence.

Meanwhile, the cooperation between China and Russia may be enhanced at a time when supply exceeds demand in the global oil market, because Russian oil enterprises must now rely more than ever before on the Chinese market. Besides, more severe social and economic problems are expected to emerge in members of the Organization of the Petroleum Exporting Countries (OPEC).

The future oil prices will be affected by supply-demand changes in the global oil market and geopolitics. First of all,lower oil prices will stimulate demand, reduce supply and eventually help createa new market equilibrium in terms of oil supply and demand. If there are large fiscal spending cuts in OPEC countries as well as social unrest, their oil supply may be affected and international oil prices would feel the impact very quickly.