British Prime Minister David Cameron told New Yorkers last week that the high price of fuel in the United Kingdom ($2.3/litre for diesel) would faze them (New York's diesel prices are about half lower). Now drivers in China should feel dizzy: China's fuel prices have risen the most in nearly three years, and Shanghai's drivers have to pay a record $1.3 to buy one liter of gasoline, rising at least 7% overnight. However, this increase in oil prices and China’s strict control of fuel prices will not greatly help the dizzy Chinese oil companies.
Both Sinopec and PetroChina have reported that profits have been hit in the first half of last year due to a decline in refining margins. The proportion of the refining business in both companies exceeds a quarter. The increase in crude oil prices is expected to exacerbate the loss of the refining operations of the two companies. Nomura estimates that although fuel prices have risen this week, operating margins are still about 10% below the breakeven point. No wonder that since the rumors of rising oil prices on Monday, the performance of these two stocks has lagged behind the Hang Seng Index.
However, since crude oil prices began to rise in October last year, PetroChina and Sinopec’s share prices have risen by a quarter and one-fifth, respectively, partly because people have hopes for China’s relaxation of oil price controls. This week’s increase in refined oil prices indicates that the slowdown in inflation has made the official sigh of relief. This also means that refined oil prices may continue to rise, but the Chinese government has not mentioned the reform pricing mechanism for refined oil.
China's refined oil price system needs reform. Due to the rise in crude oil prices, refined oil prices should have been raised earlier. The reason for this delay seems to be the impact of the National Conference held last week. The focus of China’s economic work is shifting from suppressing inflation to promoting growth, but China still hopes to control the pace of future price increases. However, some possible adjustment measures, such as shortening the observation period of crude oil price fluctuations by half, to 10 days, and adjusting the composition of the benchmark crude oil basket, can retain part of the controls and contribute to China's (still state-owned) oil supply. The revitalization of the industry.
Both Sinopec and PetroChina have reported that profits have been hit in the first half of last year due to a decline in refining margins. The proportion of the refining business in both companies exceeds a quarter. The increase in crude oil prices is expected to exacerbate the loss of the refining operations of the two companies. Nomura estimates that although fuel prices have risen this week, operating margins are still about 10% below the breakeven point. No wonder that since the rumors of rising oil prices on Monday, the performance of these two stocks has lagged behind the Hang Seng Index.
However, since crude oil prices began to rise in October last year, PetroChina and Sinopec’s share prices have risen by a quarter and one-fifth, respectively, partly because people have hopes for China’s relaxation of oil price controls. This week’s increase in refined oil prices indicates that the slowdown in inflation has made the official sigh of relief. This also means that refined oil prices may continue to rise, but the Chinese government has not mentioned the reform pricing mechanism for refined oil.
China's refined oil price system needs reform. Due to the rise in crude oil prices, refined oil prices should have been raised earlier. The reason for this delay seems to be the impact of the National Conference held last week. The focus of China’s economic work is shifting from suppressing inflation to promoting growth, but China still hopes to control the pace of future price increases. However, some possible adjustment measures, such as shortening the observation period of crude oil price fluctuations by half, to 10 days, and adjusting the composition of the benchmark crude oil basket, can retain part of the controls and contribute to China's (still state-owned) oil supply. The revitalization of the industry.
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