China's rising number of motorists could be in line for sharp
petrol price rises under a new state pricing scheme, dubbed the
"crude price plus cost" method, for oil products.
Han Yongwen, secretary-general of the National Development and
Reform Commission, said on Tuesday the commission, the nation's top
economic planning agency, considered the new pricing system would
help cut heavy losses in the oil processing and petrochemical
industries.
Industry observers believe the new system will translate into
domestic oil prices being closely linked to those on international
markets, with consumers having to bear bigger-margin price rises on
imported oil.
Han said the "crude price plus cost" method was based on the
Brent, Dubai and Minas crude oil prices, taking into account
processing costs and possible opportunities for enterprises to
profit.
A senior official with a Chinese oil processing company,
preparing to launch an IPO (initial public offering) in Britain,
said, "The news will send a signal to investment banks that our
company will have a stable profitability. This will help secure a
higher IPO price for the company."
China's rising car ownership has fueled demand for oil products.
However oil processors have failed to profit from the brisk sales,
as prices of fuel oil are under rigid state control and
international crude oil prices have been generally rising.
Sinopec, China's leading oil processing and petrochemical
enterprise, relied on imports for three quarters of its total crude
processed annually. It was highly sensitive to price hikes on
international crude markets. It often bought crude at a high price,
but sold oil products at a low price, as prescribed by the state to
stabilize the domestic market and safeguard consumers'
interests.
Though the state subsidized the company substantially in 2005
and 2006, the move failed to stem losses for the oil refiner and
petrochemicals producer.
Industry observers said China needed to build more oil
processing facilities to meet mounting demand.
(Xinhua News Agency January 31, 2007)