Editorials

Op-Ed Contributors

Chinese Press

Columnists

LETTERS

Oil prices monopoly must be broken

(China Daily)
Updated: 2009-07-03 07:55

The monopoly of Chinese refineries has empowered them to raise fuel prices quickly and cut prices slowly, says an article in Chinese Business View. Excerpt:

Chinese people must be quite familiar with how fuel prices are raised. First, major State-owned refineries complain to the government fuel prices are far below the international level, for which they are incurring heavy losses. Second, some relevant government departments begin making noises, saying they can't see national assets being devalued, and asking the government to raise oil prices. Third, refineries announce a price rise. And last, some experts comfort the public with their weird logic that the price rise would have a "limited" impact on the economy, and there is still room for a new round of price increase.

But when global oil prices dropped to their lowest in recent times (below $40 a barrel in December), Sinopec and PetroChina didn't show even a fraction of that haste to cut prices. Some private gas stations cut prices out of their own volition, though, to attract consumers. Asked why it reacted so slowly when it came to lowering prices, Sinopec said that's because they hadn't got the directive from the National Development and Reform Commission.

The delay might have had something to do with the country's fuel pricing system, but the fact is that major refineries didn't want to cut prices. Though the government has empowered these refineries to increase or reduce the base price for oil by up to 8 percent, they have almost always kept it 8 percent above the government's proposed level.

Sinopec and PetroChina formed an alliance on pricing years ago, and have very rarely implemented the price change required by the government, an adviser to the central government said. "Government policies have been reduced to printed papers," he said. And if the refineries' monopoly is not broken, it will be difficult to improve the situation.

(China Daily 07/03/2009 page13)