Retailers yesterday said the oil business had turned sluggish, as consumers needed time to take in the government's decision to raise retailing prices of oil products by 3 to 5 per cent over the weekend.
But consumers were not the only ones reacting to Sunday's oil price hike, as the country's oil producers and traders are also trying to predict how the move will affect their businesses.
Industry analysts said the weekend price increase and the government's announcement to impose a windfall profit tax on domestic crude oil sales would benefit the country's biggest refiner Sinopec the most, and leave top offshore oil producer China National Offshore Oil Corp (CNOOC) the most hurt.
"We sold little oil today, since the buyers are waiting to see what will happen," Wang Jian, sales manager of Xiamen-based Huahang Petroleum Co Ltd in South China, told China Daily yesterday.
Huahang, an oil-trading firm based in East China's Fujian Province, gets most of its oil from PetroChina and Sinopec, the country's top two oil companies. Its monthly oil sales, the bulk of which is diesel, average 5,000 to 6,000 tons. The oil is sold as fuel to ship owners and oil-fired power producers in the south.
Wang further predicted it would take about a month for his business to return to normal.
"I think the oil product price will still be raised by almost the same margin in the future, as Sunday's rise was far below market's speculations," Wang said.
The National Development and Reform Commission (NDRC) on Sunday issued a circular, saying the domestic gasoline ex-factory price would be raised by 300 yuan (US$37) a ton, and for diesel, the incremental margin was 200 yuan (US$25) a ton.
Chen Xilin, president of the country's biggest private fuel oil importer, Twinace Petroleum & Chemicals Co Ltd based in Wang's neighbouring Guangdong Province, agreed with Wang, but said it would take about a week for consumers to adjust to increased oil prices.
In a supplementary package announced by the NDRC along with the price rise, the economic policy planner also said that China had imposed a windfall profit tax on domestic crude oil sales with immediate effect, a move that aims to streamline China's oil business while the world crude oil prices remain high.
"Approved by the State Council, China will start collecting a windfall tax from oil producers for sales of domestic crude oil effective from the same date as the price hike," the NDRC said.
But further details of the particular tax, to be slapped on the nation's top three oil majors, PetroChina, Sinopec and CNOOC, will be announced separately by the Ministry of Finance, the NDRC added.
The windfall tax, a long-awaited measure announced by top government officials, will be used to recoup the heavy losses in the regulated refining industry amid the high crude price scenario, and compensate for the country's economically vulnerable groups such as grain-growers, fishermen and public transport drivers, said market observers.
Liu Gu, a senior oil analyst with Shenzhen-based Guotai Jun'an Securities Co Ltd, said that the windfall tax, collected from the three oil conglomerates, would possibly reach tens of billion yuan.
Spokesmen of PetroChina, Sinopec and CNOOC yesterday said they were not aware of the possible new windfall tax, and declined to comment further.
Liu said Sinopec, which focuses on oil refining, would gain the most from the mixture of oil product price rise and crude oil windfall tax. And CNOOC will be hardest hit of the three companies, as its refining and retailing business are not expected to start operations until 2008, she added.
Shares of Hong Kong-listed PetroChina closed unchanged at HK$8.05 (US$1), with the remaining CNOOC and Sinopec falling by 3.15 per cent and 1.053 per cent respectively on the
Hong Kong Stock Exchange.
Oil price hike sparks mixed reaction
There has been mixed reaction from taxi companies and drivers to the latest oil price rise, which took effect nationwide on Sunday.
In Beijing, retail prices will rise by 460 yuan (US$58) per ton for gasoline and 340 yuan (US$43) per ton for diesel both the highest national price rises compared with an average 250 yuan (US$30.8) and 150 yuan (US$18.5) respectively.
Taxi drivers have called for government subsidies to offset losses.
"I hope and believe the government will subsidize our daily losses caused by the rising fuel cost," said Wang Chunwang, 53, an experienced cab driver of Shunfa Taxi Co.
Driving more than 400 kilometres every day, Wang's 2.0 litre emission Hyundai-Sonata is fuelled by about 32 litres of 93-octane grade petrol, which has risen to 4.65 yuan (58 US cents) a litre from 4.26 yuan (53 US cents).
This leaves Wang short by 13 yuan (US$1.6) a day.
According to local media reports, a taxi price hearing is imminent on the re-adjustment of taxi charges per kilometre .
But officials from the
Beijing Municipal Development and Reform Commission told China Daily that a taxi price hearing is not on their immediate working list.
Wang, who has been driving cabs for 13 years, warns that raising the unit price levied on passengers is not the best way to offset the losses because "a rise in prices means a fall in customers."
"I think government subsidy is a better option," he said.
Since last July,
Beijing cab drivers have received a monthly 400-yuan (US$50) government subsidy to combat the rise in gasoline prices.
Others are less affected by the price rise. Zou Gang, who manages a local driver-training school and owns about 100 vehicles, said the gasoline price rise stings the profit margin, but the school can still make a profit.
According to an ordinary motorist, the price rise will not have a serious affect on his daily life.
"Office to home commuters like me would not be concerned by the updated gasoline price since we don't drive as much and so are less affected; what's more, we can take a bus or the metro instead," said Wang Haifeng, an IT engineer in his 30s.
Zhang Guifang of the
Beijing Bus Group Co told China Daily that bus fares in the city will not be affected by the price rise.
Price rise expected
Meanwhile, Shanghai's taxi companies have responded calmly to the news of the price hike.
"We have been expecting the price rise for some time. Since the government has promised to share relevant costs with us, we can do little but wait," said an officer surnamed Xu with
Shanghai Jinjiang Taxi Co Ltd. The State-owned taxi company has a fleet of about 4,000 cars.
The final cost-sharing scheme between the government and taxi companies should be available next month after authorities calculate the forecasted loss from the price rise.
During a meeting of
Shanghai municipal government yesterday, officials said the government will take measures to ensure taxi drivers' income in the city will not be affected by the price rise.
Shanghai media outlets have quoted some economists' predictions that more non-State companies will enter the oil retail market in the near future.
Opportunities for savvy entrepreneurs from
Shanghai and the delta regions could open up given that the wholesale price has not gone up as much as the retail price.
In Guangzhou, some taxi drivers who were severely hit by last year's price increase and gasoline shortage are crying out for compensation from the government.
"The municipal government of
GuangZhou allowed us to levy a fuel surcharge of 1 yuan (12 US cents) on passengers for each ride, which enabled us to offset much of the oil price hikes last year. But now the price climbs again!" said cab driver Li Qiangda.
"The oil price rose consecutively five times during 2005 in Guangdong and now it has happened again," he said. "I really wonder how long I can continue my job."
However, Lai Jiang, a private car owner in Guangzhou, is calm about the new oil price rise.
"I can live with the new rise, which only costs me about 60 yuan (US$7.4) extra a month," Lai said. "Anyway, it's far better than last year's oil shortage."
According to Gao Yiqian, an official with the provincial pricing bureau, the province is hammering out policies to subsidize disadvantaged communities and public service sectors.
