China Wednesday raised the price of refined oil products for the
first time in three months to reflect the oil price spike on the
international market.
The move also spells out relief for domestic refineries that
have been suffering losses because of rising crude oil costs.
The National Development and Reform Commission yesterday raised
benchmark gasoline rates by 240 yuan (US$29) a ton and diesel
prices by 220 yuan (US$26.60) a ton. The price hikes represent
about a 7 per cent increase over the previous level.
China's current oil prices vary in different provinces and
regions. Oil companies are allowed to raise or drop retail prices
by 8 per cent from a government-set benchmark.
In Beijing, retail gasoline prices have hit a new record high.
The benchmark 90-octane gasoline rose by 0.19 yuan (2.3 US cents)
to 3.42 yuan (41.4 US cents) a liter. The 0-octane diesel increased
by 0.19 yuan (2.3 US cents) to 3.46 yuan (41.8 US cents) a
liter.
Experts say the price adjustment is to catch up with the
international crude oil price hike.
New York oil futures peaked at US$48 a barrel last week. Prices
have gained 22 per cent since the end of June amid rising global
demand and risks to supplies from Russia, Iraq and Venezuela.
China pegged its domestic refined oil products to average rates
in Rotterdam, New York and Singapore.
Despite the price spike on the international market, the
government hasn't adjusted the prices since mid-May because the
government is concerned that the price increase may undermine its
efforts to cool down the economy.
Refineries, however, have to suffer heavy losses as they cannot
pass on rising costs of processing crude oil.
"The increase of refined oil prices is good news for
refineries," said Gong Jingshuang, an expert with Economic Research
Center with the China National Petroleum Corp. "It is conducive to
the bottomline of oil companies, especially refinery-heavy
Sinopec."
China's three largest oil producers -- PetroChina Ltd, Sinopec
Corp and CNOOC Ltd -- gained windfalls in the first half of this
year, thanks to the crude oil price hike.
CNOOC yesterday reported its net profit increased 11.2 per cent
year-on-year to 7.0 billion yuan (US$850 million) in the first half
of this year.
Analysts say they believe Sinopec will achieve a half-year
profit increase of about 48 per cent while PetroChina's will
increase by about 11 per cent in their interim reports later this
week.
Gong said the demand for oil products will remain strong in
following months, despite the price increase.
A thriving car market, rising investment in power,
infrastructure and construction are boosting demand for oil
products.
The rapid growth in demand for oil products has forced Chinese
refineries to run at top rates in previous months, leading to a
crude oil import surge in the first seven months of this year.
(China Daily August 26, 2004)