The China
National Petroleum Corp. (CNPC), the nation's largest oil
company, raised the ex-factory prices for both gasoline and diesel
by 60 yuan (US$7.30) per ton on June 1 to bail refineries from
losses.
Analysts said it is not likely the rises for refined oil
products will be passed down to consumers by hiking retail and
wholesales prices in the short term, although the ex-factory price
hike adds pressure for such a move.
Both retail and wholesale oil prices have been picking up
recently, reflecting worldwide hikes.
"It is to encourage the production at the refineries to meet
market demand," said a CNPC sales manager on condition of
anonymity. The government has urged China's refineries to run at
full capacity.
The manager said refineries are losing money because the
ex-factory prices of oil products lag behind crude oil prices,
which have hit 10-year high.
The Beijing Times reported Tuesday that a sales branch of
Sinopec--the nation's second-largest oil company-- raised the
ex-factory price for gasoline by 100 yuan (US$12.10) per ton and
raised diesel rates by a similar margin. However, Sinopec officials
denied they have adjusted prices recently.
Insiders said Sinopec's refineries are suffering serious losses
at the current price level.
The refinery-heavy Sinopec purchases about 70 percent of the
crude it processes from abroad, or from rival CNPC and from the
smaller China National
Offshore Oil Corp.
Imported crude oil prices have equaled, if not exceeded, the
ex-factory prices for refined oil products, squeezing the
refineries' profit margins.
Under the current system, the government sets benchmark
wholesale and retail prices according to the international markets,
and allows Sinopec and CNPC to float those prices by 8 percent.
Based on the benchmark prices, the oil companies then decide their
ex-factory prices.
Analysts said the increase in the ex-factory prices could
ultimately push retail and wholesales prices up.
Industry sources said the two largest oil companies have applied
to the State Development and Reform Commission (SDRC) to raise
wholesales prices for diesel and gasoline by 300 yuan (US$36.20)
per ton to reflect international prices hikes.
But analysts said the SDRC is unlikely to comply immediately
because the demand for diesel has picked up during the current
farming season. The government is concerned about further price
increases raising costs for poor farmers.
In March this year, benchmark wholesale prices for gasoline rose
by 300 yuan (US$36.30) per ton, or 8 percent. The diesel price went
up by 280 yuan (US$33.8) per ton.
Gong Jingshuang, an expert with CNPC's consulting institute,
added that the NDPC will not increase retail prices because
international prices are dropping as output from other
oil-producing countries rises.
(China Daily June 9, 2004)