Global Times - Sinopec to strictly implement current pricing mechanism

Sinopec to strictly implement current pricing mechanism

Source: Global Times
[14:08 August 03 2009]
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News reports on Sunday say China's oil giants, Sinopec and PetroChina, have suggested to the National Development and Reform Commission (NDRC) to adjust the current oil pricing mechanism depending on the price of crude on the international market. However, Sinopec spokesman Huang Wensheng denies the report and says Sinopec will strictly implement the current pricing mechanism.

Under the pricing mechanism that was introduced on May 8, the NDRC will consider price adjustments when the average price of international crude oil changes more than 4 percent over a period of 22 straight working days.

Since the release of the pricing mechanism, every time a pricing period is about to end, experts, traders and advisory bodies have already anticipated whether the price will be adjusted and by how much it will be adjusted. Then traders can buy a large stock of oil products or clear out their stocks for speculation.

According to media reports, the two oil giants think the pricing mechanism interferes with their sales, which they believe is too inflexible to follow the changes of the international oil prices. They think the transparent mechanism is disadvantageous to the stability of the oil market and is prone to be manipulated by international hot money. They suggested the NDRC adjust the condition of international crude oil prices' change from 4 percent to between 4 and 10 percent in order to reduce speculation.

But Huang denied Sinopec made such statements and he doesn't think the NDRC will adjust the pricing mechanism because several price adjustments have been conducted since the mechanism was publicly announced. This indicates the pricing mechanism has already started to take effect.

"We will strictly implement the national policy on oil pricing," he said.

Lin Boqiang, Director of the China Center for Energy Economics Research at Xiamen University, points out the pricing mechanism will inevitably become more transparent for China's oil prices to be more market-oriented.