Global economy is "beginning to emerge" from recession, said Ben S. Bernanke, Chairman of the U.S. Federal Reserve on Aug. 21. Crude oil price rose to its highest level since Oct. 20, 2008 on hopes of world recovery the same day, with light, sweet crude for October delivery settled at 73.89 U.S. dollars a barrel on the New York Mercantile Exchange (NYMEX). Soaring international oil prices have also increased expectations of refined oil price adjustment in China's domestic market.
The refined oil pricing mechanism approved by the State Council says that "if the 22-day moving average of international oil market changes more than 4 percent, refined oil price adjustment can be implemented." The 22-day moving average of the international oil prices has changed much higher than 4 percent since July 29, when the National Development and Reform Committee (NDRC) last raised domestic refined oil benchmark prices.
As August 26, the date for refined oil prices adjustment, is coming nearer, industry insiders predict that the NDRC is very likely to raise refined oil prices within the week.
Sinopec, China's state-owned oil giant, is looking forward to the price adjustment. A member of staff at the company said that the new refined oil pricing mechanism assured the gross profit in the company's refining sector. In the first half of 2009, the gross profit of Sinopec's refining sector hit 432 yuan per ton, the highest level in recent years. From Jan. to June 2008, the company had seen a negative profit of 752 yuan per ton from refining. The figure is also higher than that of the same period 2007.
He noted that "if domestic refined oil prices do not rise at the end of August, Sinopec's refining sector will no doubt meet a negative profit".
"Our costs have been almost as high as retail prices since July." He added.
Sinopec's net profit in the first half of 2009 rose 332.8 percent year on year to 33.25 billion yuan (4.87 billion U.S. dollars). "Although a rise over 300 percent is astonishing, the level of the net profit is normal compared with the first half of 2007 when global crude price is not as high as the first half of 2008 and the effect of price ceilings on refined oil products is not that severe," said a person with Sinopec.
Wholesalers in Tianjin, Taiyuan, Shandong, Shanghai, Jiangsu, Fujian and Jiangxi raised refined oil prices on August 21.
By People's Daily Online