People's Financial Review: Oil prices have been "three consecutive declines"

The overall situation of the “three consecutive falls” in domestic oil prices has been set. The price adjustment window is expected to open on July 11.

According to estimates by social agencies, the average movement rate of crude oil in Brent, Dubai, and Xinta on July 6 was around -9%. Driven by the "4%+22 days" pricing mechanism, it is expected that domestic gasoline and diesel will be reduced by around RMB 400/t.

Since the second reduction in domestic oil prices on June 9th, international crude oil prices have fallen more than expected. Among them, WTI crude oil futures prices fell below 80 US dollars / barrel, Brent crude oil futures prices fell below 90 US dollars / barrel. Despite the continuous rebound of international oil prices in Iran due to the situation in Iran between the end of June and the beginning of July, the general trend of the domestic oil price cut is difficult to change.

By then, there will be some cities in China that have fallen below 7 yuan/liter in oil prices and will return to the long-lost "6-yuan era." End-consumers, social traders, and large users wait for price changes under the expected price adjustment. In the same period, industries such as logistics, express delivery, and agriculture can also benefit from it.

However, under the existing price adjustment mechanism, another direct effect of price adjustment has brought about volatility in the refined oil market. A gas station manager told the author that the sales of gasoline and diesel had significant changes before and after the price adjustment. "Especially in the days before the price reduction, sales have decreased substantially, and sales have rebounded after the price adjustment."

The above market fluctuations have been fully demonstrated in the previous price adjustments. Another important point in improving the refined oil pricing mechanism is to avoid market ups and downs, effectively curb investment, and timely reflect market changes.

Under the current macroeconomic adjustment, we will usher in a good opportunity to improve the pricing mechanism for refined oil products. The return of international oil prices, the slowing down of the domestic economy, the relatively stable price level, and the window of price reform appear to be unprecedented opportunities.

Under the background of the economic downturn at home and abroad, the energy economy has weakened and it is difficult for oil consumers to remain alone. Statistics from the National Development and Reform Commission show that from January to May, domestic refined oil consumption was 100.58 million tons, an increase of 2.2%, and the growth rate was down 6 percentage points year-on-year. Among them, gasoline increased by 5.6%, and diesel consumption was basically flat. At the end of May, refined oil inventories increased by 1.79 million tons compared with the same period of last year, of which diesel increased by 1.46 million tons.

Under the conditions of loose supply and demand, the "oil shortage" is no longer. At the very least, price reforms will not push up oil prices, causing public anger. In the same period, the domestic CPI entered the “2 era” for the first time. In June 2012, the national CPI rose by 2.2% year-on-year, hitting a new low in 29 months.

The state departments need to seize the opportunity for reform. By taking the opportunity of reducing oil prices, we have improved the price formation mechanism and promoted the reform of the domestic refined oil market. In this way, it can pave the way for price reform of other resource products.

Earlier this year, the person in charge of the National Development and Reform Commission stated that the new plan will be launched in the event that international crude oil prices have stabilized. Whether or not the new mechanism can be issued on time will depend to a large extent on how the international oil prices are drawn.

The current pricing mechanism for refined oil products started at the end of 2008. Under this mechanism, domestic refined oil prices have gone through 20 lifts. At present, the market players of all parties expect a more scientific pricing mechanism to be introduced as soon as possible.

Of course, the market-oriented reform of refined oil should not be implemented in one step. It is necessary to link reforms such as price reform, market access, government supervision, oil futures market and petroleum strategic reserve, and carry out plans in phases.

At present, domestic oil prices have been indirectly linked to international crude oil prices. After the market adapts for a period of time, domestic oil prices can be directly linked to international oil prices. At the same time, there are plans to liberalize market regulation and give private companies market space, especially to liberalize imports. In this way, a diversified market structure will gradually form.