|
Although China's major oil firms are likely to garner windfalls from surging crude oil price, currently hovering around a 13-year high, this will increase the costs to oil consumers such as airlines.
But experts say that the overall impact of the price hike on the national economy will be limited.
Bench market crude oil futures touched US$40 a barrel last week - the highest finish since the 1991 Gulf War - amid concerns over Middle East security and tightened US supplies. The price eased yesterday with growing expectations that the Organization of Petroleum Exporting Countries (OPEC) will soon increase supplies in order to offset surging prices.
Experts said the oil price rise backs strong performances by the three largest domestic oil majors including PetroChina, Sinopec and CNOOC Ltd.
The profits of the three companies are expected to rise by an average of 7-8 percent on every dollar per barrel rise in the crude oil price, they said.
If the strong momentum maintains, the full-year profits of the companies are likely to rise by 20-30 percent.
"A high oil price sustains the exploration and production business," said Li Zhipeng, an oil analyst at Xiangcai Securities Co Ltd.
"While the refinery major keeps flat, the strong crude oil also helps push the prices of petrochemical products higher."
Petrochemical product prices increased by up to 30 percent since last year. And this performance will continue throughout this year with high oil prices and recovering demand, said Li.
Chinese oil companies have already benefited from the price rise last year, with an average year-on-year profit rise of 37.4 percent. The oil giants' profits account for one quarter of China's industrial profits.
The crude oil price surge, however, might be a nightmare for airlines and raw material users due to increased fuel costs and freight charges.
Although the government allows airlines to peg a premium on flight charges, it does not always cover the increase in fuel costs, experts said.
And the high prices almost doubled international freight rates for dry cargo, which, along with increased demands, has increased raw material prices such as iron ore, alumina and fertilizer.
For instance, the CIF (cost, insurance and freight) price for Russian kalium fertilizer to China has increased by nearly 40 percent from last January to the current price of US$165 per ton.
But experts said that impact of rising oil prices on the nation's economy won't be harder than that on developed economies, because of "China's relatively low dependence on crude oil and the low inflationary pressure." Oil consumption constitutes only 20 percent of the nation's total energy mix, as compared with 55 percent in Japan and 40 percent in the United States.
And the government would not raise the domestic retail prices for oil products such as diesel and gasoline immediately to reflect the international price rise, experts said.
China pegged its domestic refined oil products to average rates in Rotter Dam, New York and Singapore. Sinopec and PetroChina, the only two authorized oil companies to wholesale gasoline and diesel, are allowed to raise or drop their retail price by 8 percent from the government-set benchmark.
The National Development Reform Commission has raised benchmark gasoline rates by 300 yuan (US$36.3) a ton, or 8 percent, in March, but kept prices of diesel unchanged.
"The government wants the price to be stable," said Shan Hongqing, an expert with the Economic and Development Research Institute of Sinopec. "Either a high or low price will hurt the national economy."
Shan also said the claim that the strong oil demand from China has fanned the global oil price rise is overexaggerated.
Earlier this year, the Paris-based International Energy Agency said China's breakneck economic growth, fuelling record oil imports, boosts this year's surge in world crude prices.
(China Daily May 11, 2004)
|
