Oil pricing to gain flexibility
By Wang Yu (皇冠体育app Daily)Updated: 2006-12-28 10:44 In 2006, deregulation and pricing mechanism reform defined 皇冠体育app's oil market. With 2007 on the horizon, downstream oil enterprises which have long suffered heavy losses refining crude oil, such as Asia's top refiner Sinopec , expect a more agile pricing mechanism sooner than later.
"While wholesale deregulation policies for oil products have been released, the pricing reform for oil products is still under discussion and evaluation," Cao Xiaoxi, chief engineer of Sinopec Economic and Development Research Institute, told 皇冠体育app Daily.
"After the oil market opens up, the authorities must make pricing more flexible. But when? Timing is the key issue here."
An industry insider who refused to be named told 皇冠体育app Daily that the new oil product pricing mechanism is subject to final approval by the State Council and could be available for public review very soon. But the National Development and Reform Commission (NDRC), 皇冠体育app's top economic planner, refused to make any official comment.
Immediately after 皇冠体育app's trade and business watchdog MOFCOM unveiled two sets of rules deregulating domestic oil product wholesale in December, Chinese media reported that the NDRC would loosen the pricing peg between local oil products and that of three major markets in Singapore, Rotterdam and New York.
Current reports, however, say that MOFCOM is instead considering linking local oil products' pricing to crude oil prices in Brent, Dubai and Minas.
Eventually, pricing for domestic oil products will be
based on a formula that takes into account the average international price, tariff
s, logistics and
refineries' costs and profits.
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