NDRC has not given up its guidance on the price of new refined oil products

“At present, opinions and assessments have already been carried out.” On September 21, a pricing mechanism for new refined oil products that is rumors in the industry recently was about to be introduced. A researcher at the Energy Research Institute of the National Development and Reform Commission told reporters that “only the trial was released last year. The management measures, the official regulations to be introduced in the future, will be adjusted under the general principles of the previous management measures, and will further highlight the guiding principles of the market. The main highlights will be to shorten the price adjustment cycle to better align with marketization and curb speculative arbitrage. However, the NDRC will not give up its guidance on refined oil prices (crack the oil price dilemma)."

Recently, the National Development and Reform Commission issued an exposure draft (hereinafter referred to as the “Draft for Soliciting Opinions”) on the refined oil price operation and operation plan issued under the “Reform of refined oil pricing mechanism”. In this draft, in addition to shortening the price adjustment interval of refined oil from the current 22 days to 10 days, two specific operational plans were also proposed: First, the pricing authority was delegated to the three major oil giants, and secondly, the commission was entrusted by the National Development and Reform Commission. The company issued a price adjustment.

According to the first plan, when the crude oil price in the international market is between US$40-130 per barrel, the three major oil companies can determine the price adjustment plan according to the changes in the oil prices in the international market and the supply and demand of the domestic refined oil The NDRC no longer issued a document.

“The decentralization of pricing power is a plan that the three major oil giants are striving for. However, considering that this may further strengthen the monopoly of the three major oil companies, it should not be considered from the perspective of further promoting marketization and maintaining fair market competition. There are conditions for implementation," said the researcher.

According to the second proposal put forward in the Exposure Draft, when the domestic refined oil meets the price adjustment boundary conditions, the NDRC will entrust the intermediary agency to announce the changes in the oil price in the international market and the maximum retail price of domestic refined oil. The company can independently determine the specific implementation based on this. Price, the government no longer issued a document for each price adjustment.

“This is also to further align with marketization and highlight the guiding role of the market in pricing. However, in order to maintain the relative stability of the market and prevent excessive speculation, in the short term, price adjustment will still be conducted under the guidance of the National Development and Reform Commission,” said the researcher. "The adjustment of the refined oil pricing mechanism cannot be achieved in one step. It must be gradually adjusted according to the actual situation in the country and gradually released."

According to Ji Xiaofeng, an analyst at China Merchants Securities, “the marketization process of domestic refined oil pricing will be significantly accelerated in the coming months. Various indications have shown that there may be areas of change, except for the shortening of the refined oil price adjustment cycle. Including, the petrol price will be liberalized and the price of gasoline and diesel under the price of a certain crude oil will be priced independently."

In Gu Xiaofeng's view, the conditions for China's refined oil pricing mechanism to become truly market-oriented have basically matured. “The marketization reform of China's refined oil pricing mechanism started in 2001 and experienced price adjustments from purely based on Singapore’s market oil prices to relying on changes in oil prices in the three places. Now it has allowed refined oil sales companies to compete under the state-imposed maximum price limit. It is said that the market is already quasi-market. Under the current market conditions, competition has gradually intensified, and the implementation of the new refined oil pricing mechanism has been implemented for a year and a half. The timing of the third phase of adjustment and reform is ripe."

The “quasi-market state” of the Chinese refined oil market is more manifested in the two links of “refinery” and “gas station”. Here, the Chinese refined oil market already has a basis for full competition.

First of all, in recent years, the capacity of China's oil refineries has increased substantially, and the main players have also become more diversified. In addition to the two traditional giants of Sinopec and PetroChina, China Chemical Industry, China Weapons and CNOOC have competed to enter the refining sector. In addition to the advantages of Sinopec in the Yangtze River Delta, the competition in other regions (such as the Pearl River Delta and Bohai Bay) is fierce.

In the field of gas stations, the combined share of the two giants is about 50%, and other competitors are even more extensive.

"There is no doubt that a more flexible pricing mechanism for refined oil prices will further promote market competition, so that China's oil market can truly form a market-based competitive environment," said Yan Xiaofeng.