The current pricing mechanism does not bother consumers to complain that oil companies also suffer from losses

The refined oil price has remained high since the April 7 increase. As the 22+4% price adjustment condition has caused the price of refined oil to “slow up”, the current pricing mechanism has been widely questioned by the market. According to semi-annual report released by the three major oil companies, high oil prices did not allow them to increase profits. On the contrary, oil refining was a drag on the more profitable segment.

The reason for this is that Zhou Jiping, vice chairman and president of China National Petroleum Corporation, said that the loss of PetroChina's refining and chemical business was mainly due to the lack of market-oriented pricing mechanism for refined oil products in the Mainland.

The current pricing mechanism for refined oil products is not favored on both sides. It is not just consumers but also producers that are vulnerable to oil price fluctuations and falling.

The semi-annual reports of the three major oil companies have all been released. In the first half of 2011, Sinopec achieved a net profit of 42.1 billion yuan, PetroChina 66 billion yuan, and CNOOC 39.3 billion yuan, a total net profit of 146.5 billion yuan.

Previously, major brokers forecasted that PetroChina was expected to earn 9% more to 71.06 billion yuan, but the figures were far below market expectations due to losses in refining and chemical operations.

According to the data, both PetroChina and Sinopec’s refining segments suffered large losses. Among them, the operating loss of PetroChina's oil refining business was RMB 23.358 billion, which was a decrease of RMB 26.345 billion compared with the profit of RMB 2.897 billion in the same period of last year. Sinopec’s refining business segment had an operating loss of RMB 12.2 billion. The year-on-year decrease of 17.9 billion yuan.

Fu Chengyu, chairman of Sinopec, stated that when the international oil price is 90 US dollars, the refining business will only record a small profit. If it exceeds 90 US dollars, the refining business will lose money.

According to Ping An Securities estimates, in the first half of 2011, the average price of PetroChina crude oil was US$101/barrel, up 40.3% from the same period last year. In the first half of the year, gasoline and diesel sold 62.88 million tons. Compared with the same period of last year, it rose by 11.5%. Under the circumstances of high inflationary pressure in the domestic market, the sharply rising oil prices in the first half of the year failed to pass through to the price of refined oil. The price of refined oil rose by about 20% over the same period of last year. PetroChina's refining and chemical business suffered losses on the basis of controlled oil products. It lost 3.7 billion yuan in the first quarter and expanded to 17.3 billion yuan in the second quarter.

Zhou Jiping pointed out that the loss of PetroChina's oil refining and chemical business was mainly due to the insufficiency of market-oriented pricing mechanism for refined oil in the Mainland and the high price of international crude oil, and the adjustment of domestic refined oil prices was not in place. Losses and policies in the first half of this year are closely related, and this is also a feature of China's economic development.

He said that in the future, the demand for oil and gas in China's economic development will continue to show an upward trend. The price mechanism for refined oil products should be guided to ensure the healthy and sustainable development of the oil and gas industry.

In addition, Zhuo Chuang Information Research believes that the increase in the cost of product oil taxes is also the reason for the increase in the loss of PetroChina. The annual report shows that taxes and duties other than income tax increased by 49.4% to 13.3622 billion yuan. Among them, the increase in special earnings is most obvious. As the international oil price rises and drives domestic crude oil prices to rise, China Petroleum has increased its special oil revenue in the first half of the year by 97.58% compared with the same period of last year, reaching 510.76 billion yuan.

Researchers in the industry indicated that the existing system has caused greater pressure on the refining chain. The current international crude oil price fluctuates greatly, and the domestic crude oil dependence on foreign oil has reached more than 55%. In order to ensure the profit of sales, refining losses are inevitable. However, as a local refinery company for the “wind vane” of the domestic refined oil market, the ex-factory price of the refined oil refinery is the actual sales price. Due to the reduction of intermediate links, the company’s cost is significantly reduced, and its profitability is also considerable.

Therefore, Zhuo Chuangxin believes that the current reform of refined oil pricing mechanism should not only consider the formula problem, but should consider the domestic market supply situation comprehensively. The main system and the corresponding tax issues are also the focus of the reform. In addition, the shortening of the price adjustment time to 10 days, changing the extent of crude oil fluctuations can not cure the problem, and Zhao Youshan, president of the National Petroleum Distribution Association, believes that shortening the time for price adjustment will become a deadlock for private oil companies, and the reduction in profits will cause a large number of private enterprises to withdraw. Aggravate the monopoly of the refined oil market.