Others News
- Fuel price cut unlikely despite crude dip
Date: 11-Jan-2007 Sources: (Shenzhen Daily)
TOP oil executives in China said global prices are not low enough to warrant a cut in domestic fuel rates, domestic media reported yesterday, a sign analysts say suggests a possible delay of a much-touted new price scheme.
In a briefing to domestic media last week, heads of PetroChina, Sinopec Corp. and CNOOC Ltd. defended their contribution to the national economy as they suffer heavy refining losses under the government's artificial cap on fuel prices.
Set against speculation for a price cut, the meeting offered an opportunity for the government to signal that fuel prices will likely stay unchanged for months. This may be good for the bottom lines of domestic refiners after a steep fall in crude, but offered no relief to consumers who have seen a series of price hikes.
U.S. light crude futures lost nearly 8 percent last week to end near US$55, a level industry experts had said was earmarked for the launch of a new crude-linked price scheme.
'The government may choose not to adjust prices even when prices fall to US$50, to allow oil firms to recoup refining losses,'said energy consultancy Ejin's Wu Jun, a seasoned analyst on Chinese oil policy.
Analysts said by keeping the status quo, the government might achieve two objectives in one swoop: allowing firms to improve their refining margins and helping to curb consumer demand.
Oil markets have speculated that the government would introduce a price mechanism linking domestic prices with crude costs and includes a fixed refining margin, replacing an old one tied to international refined fuel markets but detached from domestic supply and demand realities.
The new crude cost-plus system would be a boon for refiners but would lead to frequent changes to retail prices, not the best option for a government obsessed with social stability. China has made 13 price changes in four years, or one every four months.
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