Oil pricing to gain flexibility
By Wang Yu (China Daily)Updated: 2006-12-28 10:44
"I anticipate that if international oil prices stay high, the new pricing system will be adopted early next year to lessen losses for major refineries," Cao said. "However, since the new mechanism hinges on global prices' fluctuations, grass-roots consumers may find this unacceptable when global prices are too high. Authorities must also bear this in mind."
Angelina Lee Mei Leng, chief analyst of Platts' Beijing office, believes that the new pricing mechanism should provide State subsidies for low-income individuals, such as farmers, and sectors of public interest, such as public transportation. Platts is the world's largest provider of energy information and market research.
"The much-talked about new pricing mechanism is indeed more scientific. It better reflects the true value of oil products and the relationship between demand and supply. However, the government should protect underdogs such as low-end consumers," Lee said.
Soaring international oil prices have boosted the profitability of China's oil exploration and production business. However, the rigidity of the current pricing mechanism for local oil products causes the refining sector to run at huge losses.
Currently, the government maintains a tight grip on the pricing of major oil products, keeping it below the global average in order to steady inflation and supply fluctuations.
The NDRC raised the domestic oil price twice this year in March and May in
response to surging global oil prices.
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