New pricing plan: Price adjustment of refined oil or no layer approval

The news of reform of the refined oil pricing mechanism has finally made new progress after six months of silence. The reporter learned yesterday that two weeks ago, the National Development and Reform Commission convened another expert to seek opinions on revised ideas. Experts at the meeting disclosed that compared with the current implementation plan, the revised new plan has not changed the framework, but the price adjustment period will be shortened to about 10 days, and the price adjustment is expected to no longer be approved and become an automatic price adjustment. It is understood that this new plan has been reported to the State Council for approval.

>> Half-price cycle of program content does not need to be approved Yesterday, an expert who participated in the Development and Reform Commission's solicitation meeting told reporters that at that time, the NDRC had come up with a new plan for refined oil pricing to solicit expert opinions. In the new plan, the NDRC's revision of the current refined oil pricing mechanism mainly focuses on two aspects. First, the price adjustment period is shortened, and second, the price adjustment no longer requires approval.

The meeting was held two weeks ago. The scale of the participants has been greatly reduced compared to previous discussions. There are only experts and no company representatives.

According to the above-mentioned experts, the revision of the NDRC is that the price adjustment period has been shortened significantly compared with the current 22 working days. Experts have discussed the matter for 10 days, 12 days and 14 days. The general view is 10 days.

What is more noteworthy is that, with respect to the current implementation of the plan, another major change in the new plan is that once the new price adjustment plan is implemented, the maximum retail price limit for refined oil products will be automatically adjusted, and it is no longer necessary to apply at all levels.

The core of the currently implemented refined oil pricing mechanism is that when the average price of crude oil in the international market changes more than 4% for 22 consecutive working days, domestic refined oil prices can be adjusted accordingly.

According to the above experts, the current price adjustment process for refined oil products is basically based on the fact that the international oil price changes have triggered the price adjustment mechanism, and the NDRC has formulated a price adjustment plan, which is then reported to the State Council for approval. After the approval of the State Council, the National Development and Reform Commission issued a price adjustment notice to adjust domestic prices.

After the implementation of the new plan, the procedures for layer approval will be cancelled. It is reported that because of the influence of various factors in the market economy environment, the approval process sometimes leads to the inability to promptly introduce the price adjustment, or for other reasons to consider that the price cannot be adjusted eventually.

The reporter learned that the NDRC, after listening to expert opinions, will revise the new plan and report it to the State Council for approval.

>> Corporate response industry welcomes automatic price adjustment mechanism In fact, relative to the shortening of the price adjustment cycle, the price adjustment mechanism can be triggered automatically, and it is also welcomed by the industry. Yesterday, Sinopec, PetroChina, and some local refiners said that at present, the biggest problem with the refined oil pricing mechanism is that the pricing machines have been decorated.

In fact, since the implementation of the “Petroleum Prices Management Measures (Trial)” in 2009, the general feeling in the industry is that, when domestic refined oil prices should rise, the NDRC often postpones price adjustments for several days, or no adjustments, or adjustments are not in place.

Taking October 26, the latest price adjustment, as an example, the domestically adjusted refined oil price is equivalent to the international oil price of 73 US dollars, while the international oil price is about 80 US dollars during the same period. The domestic refined oil price has obviously not been adjusted.

And so far, changes in international oil prices have touched the red line of domestic product oil price adjustment. The time interval from the last price adjustment also exceeded 22 working days, but domestic refined oil prices have not been able to adjust. Yesterday, the test from CBI changed the moving average price of 22 consecutive working days by more than 5%, which has already touched the 4% red line.

Therefore, refiners told reporters yesterday that there may not be the best pricing mechanism, but the key is to strictly follow the published rules of the game. The market has already called for the pricing mechanism of refined oil products to be changed to a triggering mode. The market has also spread two options for pricing power: allowing oil companies to independently set prices under state supervision or entrust third parties to formulate new price adjustment standards and calculation formulas.

However, the above-mentioned experts told reporters that the price adjustment in the new plan will still be announced by the National Development and Reform Commission, but it may reduce the link for submitting approvals.

>> Reasons The interpretation of the diesel shortage prompted the plan to accelerate the reform of the pricing mechanism for refined oil products that had been on hold for nearly a year. Why was it put on the desk of the NDRC at this time? Diesel shortage or a stimulus. Although the current shortage of diesel fuel is spreading across the country, the shortage of diesel oil has exposed the core weaknesses of the refined oil pricing mechanism. This soft underbelly is that the price adjustment cycle is too long, and the price cannot be adjusted in time. As a result, refineries with oil refining capacity accounting for nearly three cents of China's refinery capacity have reduced supply in the absence of profits or insufficient profits.

Feng Shiliang, a senior analyst at the China Petroleum and Chemical Industry Federation, said that China’s refining capacity is the second largest in the world and can fully meet the needs of the domestic market. It is actually surplus. Why did the recent diesel shortage emerge? Huang Wensheng, a spokesperson for Sinopec, believes that because some oil refining capabilities have not played a role, information from the China Petroleum and Chemical Industry Federation shows that the load of ground refining does decline.

The person who did not wish to be identified explained that the fundamental reason that the refining did not play a role was that oil refining did not make money, crude oil costs are high, and refined oil prices are low, so they do not make money.

>> The introduction of time to suppress inflation needs to be difficult to come out before the end of the year Yesterday, there are news that the new plan for refined oil pricing has been reported to the State Council, waiting for approval, the end of the year or early next year. However, experts predict that it will be difficult to introduce this year. Because on the one hand, the approval of the State Council requires time. On the other hand, the current “war” inflation across the country is not a good time for a new proposal.

Lin Boqiang, director of the China Energy Economic Research Center at Xiamen University, said in an interview with reporters that once the above-mentioned new plan is implemented, the domestic refined oil price will change more frequently. According to the current trend of international oil prices, domestic refined oil prices will rise, affecting agricultural products, food, transportation and other industries. The price is not conducive to the current overall situation of controlling inflation.

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