New jet pricing regime may signal further reform in oil product pricing mechanism

Chemical News: New jet pricing regime may signal further reform in oil product pricing mechanism

https://www.chemnet.com Jul 13,2011
The linkage of domestic jet ex-refinery prices with international prices may indicate a speed-up in perfection of gasoline and gasoil pricing mechanism, some market sources showed their optimism.

Oil product prices may be adjusted more frequently, transparently and opportunely, the sources expected.

However, some sources still believed the government would be conservative in liberating gasoil and gasoline prices amid lofty crude prices and high inflation pressures."The opportunity for freeing oil product prices is still not mature," said an experienced trader in South China.

According to the current pricing regime, the government would consider revising oil product retail ceiling prices once the Brent, Dubai and Cinta crude prices rises or falls outside a daily rolling average of 4% in 22 consecutive working days. Refiners would enjoy normal profit when global crude prices are below US$80/bbl, but would face narrower profit margins when the crude prices rise above US$80/bbl. However, fuel prices would not go further up, or only be raised by a small margin, when crude prices rise above US$130/bbl, and fiscal and tax tools would be used to ensure supplies
Adjustments in the government-capped oil product prices always lagged behind changes in international crude prices.

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