Ten times in half a year! Why is domestic refined oil so "crazy"

On the afternoon of June 14, the National Development and Reform Commission (hereinafter referred to as the "National Development and Reform Commission") announced that since 24:00 on the same day (that is, 0:00 on June 15), the domestic gasoline and diesel prices have increased by 390 yuan and 375 yuan
per ton respectively.

In just half a year, the price of domestic refined oil products has risen 10 times, which may be unique in the history of new China
.
So, why is the "rally" of domestic refined oil products so crazy?

In half a year, "ten rises and one fall", has the barrel become expensive?

Since 2022, the domestic price of refined oil products has been adjusted eleven times, of which 10 times have been raised, 1 time has been lowered, and after the rise and fall have offset each other, gasoline and diesel have risen by 2720 yuan / ton and 2620 yuan / ton, respectively, and the discounted price of No.
92 gasoline, No.
95 gasoline and No.
0 diesel fuel have risen by 2.
14 yuan, 2.
26 yuan and 2.
23 yuan
respectively.

After the price adjustment of domestic refined oil products on June 15, the No.
92 gasoline in all provinces and regions will enter the "nine-yuan era" in an "all-round" way; Guangdong, Guangxi, Sichuan, Hainan, Jilin, Yunnan, Tibet and other provinces and regions where the No.
95 gasoline is greater than or equal to 9.
68 yuan / liter before the current round of price adjustment, "taking the lead" to enter the "ten yuan era"; Beijing, Shanghai, Jiangsu, Tianjin, Chongqing, Jiangxi, Liaoning, Anhui, Fujian, Shandong, Shanxi, Guizhou, Hebei, Henan, Zhejiang, Hubei, Hunan, Heilongjiang and other provinces and regions with gasoline greater than 9.
5 yuan / liter before the current round of price adjustments are moving closer
to the "Ten Yuan Era".

In 2008, the international oil price was $147 per barrel, and the domestic oil price was 6.
3 yuan per liter; now the international oil price is $120, and the domestic oil price is already about 10 yuan
.
In this regard, some netizens issued a soul torture question: Is the barrel becoming expensive?

On May 30 this year, Sinopec said on the official micro that the international crude oil price in 2008 was more than 140 US dollars, but the domestic refined oil was sold at 80 to 90 US dollars per barrel, which is to avoid passing the high oil price to various industries, so the state and the "three barrels of oil" spent a huge amount of money to subsidize
.
At that time, each liter of oil subsidized the owner of the car by 4 to 5 yuan, a total subsidy of 165.
2 billion yuan.

This made the oil that was supposed to be more than ten yuan per liter sell for only 6.
3 yuan
.

Below: On June 14, 2022, car owners lined up to refuel
before the price increase.

Since then, in 2009, the reform of refined oil prices and taxes and fees was implemented, and the road maintenance fee was included in the price of gasoline, and the consumption tax was raised, which brought about a rise in the price of refined oil products by more than
1 yuan per liter.

In December 2008, the State Council issued the Notice on the Implementation of the Reform of Refined Oil Prices and Fees and Taxes, requiring the rationalization of refined oil prices and the integration
with the international market.
The State Council requires that the pricing of refined oil products should reflect the changes in oil prices in the international market and the production costs of enterprises, and also consider the supply and demand relationship in the domestic market; It is necessary to reflect the scarcity of petroleum resources, promote resource conservation and environmental protection, and take into account the bearing capacity
of all aspects of society.

In May 2009, the National Development and Reform Commission formulated and issued the Measures for the Administration of Petroleum Prices (for Trial Implementation), which requires that the maximum retail price of domestic refined oil products be adjusted according to the changes in international crude oil prices
within 22 working days.

In January 2016, the NDRC upgraded the Measures for the Administration of Petroleum Prices (for Trial Implementation) to the Measures for the Administration of Oil Prices, with a price adjustment period of 10 working days
.

The "ten rises and one fall" in half a year this year is determined by
the pricing mechanism of domestic refined oil products since 2016.

According to Article 6 of the Measures for the Administration of Petroleum Prices issued by the National Development and Reform Commission in 2016, "when the price of crude oil in the international market is lower than US$40 per barrel (inclusive), the price of refined oil is calculated according to the crude oil price of US$40 per barrel and the normal processing profit margin
.
" When it is higher than $40 per barrel and less than $80 (inclusive), the price
of refined oil products is calculated according to the normal processing profit margin.
Above $80 per barrel, the processing margin is deducted until the refined oil price
is calculated at zero processing profit.
When it is higher than US$130 per barrel (inclusive), in accordance with the principle of taking into account the interests of producers and consumers and maintaining the smooth operation of the national economy, appropriate fiscal and taxation policies are adopted to ensure the production and supply of refined oil, and the prices of gasoline and diesel are not mentioned or undermentioned in principle
.
"

That is to say, when the international oil price is lower than $40, the domestic oil price does not fall; When it is higher than $130, domestic oil prices are not mentioned or underestimated; Between $40-130, domestic oil prices are adjusted normally according to the mechanism, and they should rise and fall
.

Such a pricing mechanism has led to a linkage mechanism between domestic refined oil prices and international oil prices, but it is not fully followed
.
Up to now, the refined oil price adjustment mechanism has touched the "floor price" of $40 per barrel (international oil prices have fallen, domestic oil prices have not fallen), and from mid-March to the end of June 2020, corresponding to No.
92 gasoline 5.
49 yuan / liter, No.
95 gasoline 5.
84 yuan / liter
.
But there is still $10 to go before the $130 "ceiling price" (international oil prices rise, domestic oil prices do not rise or less
).

It is worth mentioning that the adjustment cycle of refined oil products in China is 10 working days, and the performance of several major futures market prices will be observed within 10 working days, and then weighted average to obtain a price
.
When this average price changes significantly compared with the previous cycle, and the corresponding domestic refined oil adjustment range reaches more than 50 yuan per ton, the new round of refined oil adjustment window will be opened, otherwise it will accumulate to the next round of adjustment
.

Under this adjustment mechanism, the adjustment of refined oil products is not to look at the performance of international oil prices every day, but to look at the comprehensive performance
of 10 days.

From the perspective of the reform of the pricing mechanism of refined oil, the current frequency of price adjustment with an interval of 10 working days is undoubtedly more in line with the direction
of market-oriented reform.
However, for consumers, after the frequency of price adjustment is faster, the transmission of refined oil products to the rise in crude oil prices is also more rapid, and the impact of high oil prices is also more significant
.

The U.
S.
Energy Information Administration expects world oil consumption to increase by 3.
62 million barrels per day in 2022, an increase of 3.
74%, and the total will reach the level of 100.
5 million barrels per day, exceeding the number in 2019 before the COVID-19 pandemic and setting a new record for
world oil consumption.
Among them, oil consumption in non-OECD countries will increase by 2.
2 million barrels per day, and the total will reach 54.
76 million barrels per day; Oil consumption in OECD countries will increase by 1.
4 million barrels per day, bringing the total to 45.
76 million bpd; The growth of oil consumption in the United States and China will account for 39% of the world's oil
consumption.

The turbulent international situation since 2022 has caused international crude oil prices to soar
.

First of all, in this round of refined oil price adjustment cycle, Europe announced the sixth round of sanctions against Russia - according to the sanctions plan, the EU will gradually stop the purchase of Russian crude oil by sea by member states in the next six months, and ban 90% of Russian oil imports
by the end of the year.
This means that Russian oil exports are expected to be suppressed
.

Second, on June 2, OPEC+ (composed of OPEC and 10 non-OPEC producers led by Russia) decided to increase crude oil production by 648,000 bpd in July and August, up 50%
from the previously planned increase of 432,000 bpd.

Barney Gray, global crude oil analyst at ICIS, said: "At present, international crude oil prices continue to rise at a high level, mainly due to the double impact
of pessimism about the 'OPEC+' decision to increase production and further sanctions on Russian oil.
Although the production of the 'OPEC+' resolution exceeds the originally agreed target, some OPEC members are struggling to complete the existing production quota, so whether the 'OPEC' can achieve this new production target is still a question
.
”

In terms of market reaction, the OPEC+ production increase resolution failed to offset the supply gap
caused by Russian crude oil sanctions.
The Price Monitoring Center of the National Development and Reform Commission expects that if the "OPEC+" continues to maintain a small increase in production, the global crude oil supply tension will continue to support international oil prices to maintain a high level
.

In addition, global oil demand is in the peak season, with the arrival of the US driving season boosting gasoline demand, so international oil prices are running strongly and hitting the second highest
in the year.

Domestic oil prices are highly correlated
with international oil prices.
According to the relevant data of the National Bureau of Statistics and China Customs, China will consume about 700 million tons of crude oil in 2021, produce about 199 million tons of its own, accounting for 28%, and import about 501 million tons, accounting for 72%.

At this stage, domestic oil prices are basically in strict accordance with the changes in foreign oil prices, showing a trend of upward movement
.

Is the price of refined oil products in China expensive?

For ordinary people, the intuitive feeling is that domestic refined oil products are always "up and down", and this year is even more "a rising voice"
.
It has been more than two months
since the last oil price cut.
Many people call out "can't eat"
the rising price of oil.
So, is the price of refined oil products in China really expensive?

Taking the price on June 6 as an example, the data of the global oil price network shows that the most expensive place in the world for gasoline is still Hong Kong, with a liter of gasoline close to 20 yuan; The cheapest is Venezuela, where a liter of gasoline is less than $
0.
15.
On the same day, the price of gasoline in Chinese mainland was 9.
67 yuan / liter, the price of gasoline in the United States was 8.
85 yuan / liter, and the price of gasoline in France was 15.
06 yuan / liter
.
The world average gasoline price is 9.
50 yuan / liter
.

There are huge differences
in oil price levels between regions of the world.
In countries that produce and export oil, gasoline prices are relatively low
.
In addition, the retail price of oil purchased at the same price by different countries in the international market also leads to different retail prices due to different tax structures
.

In general, gasoline prices are relatively high in rich countries, and gasoline prices are mostly in oil-producing countries
.
For example, Nordic countries such as Norway, Denmark, Finland and other Nordic countries have one of the highest oil prices in the world, second only to Hong Kong, with a liter of oil at about 17 yuan to 19 yuan (June 6).

In Western European countries such as the Netherlands and Germany, oil prices are also relatively high, with oil prices per liter of oil at 14-16 yuan
.
Oil prices in Middle Eastern countries are relatively low
.

The United States is more special, although it is a developed country, but the price of gasoline is low, which leads to the high degree of dependence of Americans on cars for travel
.
This is also an important reason why
the United States has money and technology, but so far a high-speed rail has not been built.
However, in the past two months, the price of gasoline and diesel in the United States has hit a record high
.

The United States is not only the world's largest oil producer, but also the world's lowest level of refined oil tax burden, taxes and fees accounted for 12% and 11%
of its ordinary gasoline and diesel prices, respectively.
In contrast, it is roughly estimated that the tax burden cost of the circulation link accounts for about
40% of the price of refined oil products in China.

According to the global oil price network, among the 170 countries and regions included in the statistics, gasoline prices are ranked from high to low, and China ranks about 70, which is in the middle and upper levels
.
It should be known that more than 70% of China's oil is imported, and oil prices are greatly affected by fluctuations in
the international market.
In this way, China's oil prices are not particularly expensive
.

Is it possible for oil prices to fall this year?

Since 2022, domestic refined oil prices have only been lowered
once.
Many people want to know, is it possible for oil prices to fall this year?

The "12th round" price adjustment of domestic refined oil products this year will be opened
on the evening of June 28.
Because the price adjustment cycle is 10 working days, and as of June 20, the statistical cycle has passed the halfway point, and the crude oil change rate is -2.
52%, which is converted to a downward adjustment of 135 yuan / ton, if the decline can be maintained in the later period, this round of oil prices will have the opportunity to fall
.
Of course, the real decision on oil prices won't be known
until June 28.

Whether domestic oil prices will fall mainly depends on international oil prices
.
At present, "bullish" is the mainstream attitude
.

Above: Oil prices
in Harlem, New York, on June 15, 2022, local time.

Recently, the international crude oil futures price has shown a volatile upward trend, and the fear of insufficient supply and increased demand have supported the international oil price to maintain a high of
$120 per barrel.

ANZ analyst Kumari said in June that the EU's ban would certainly worsen the oil supply backdrop and widen the market supply gap to 1.
5 million to 2 million barrels
per day in the second half of the year.

In its report in early June, Goldman Sachs said oil prices needed to rise further to normalize unsustainably low levels of global oil inventories
.
The bank expects Brent crude to be priced at $140/b in the third quarter (previously expected at $125/bbl) and $130/b in the fourth quarter (previously expected at $125/bbl
).

Cinda Securities also said that in 2022, international oil prices ushered in an upward inflection point, oil prices will remain high for a long time in the medium and long term, and energy resources are expected to be in a booming cycle
in the next 3-5 years.

"At present, it is in the peak season of traditional consumption of crude oil, and it is also the season of extreme weather such as hurricanes, and crude oil has a tendency to hit a new high again, and it is not ruled out that it may
break through $130 / barrel.
" Wang Shan, an energy analyst at Jinlianchuang, said
.

Lin Boqiang, director of the China Energy Economics Research Center at Xiamen University, reminded the people to be prepared for high oil prices "for several years": "At this stage, domestic oil prices are basically in strict accordance with international oil prices
.
The international situation can only fall if the international situation eases, but there will be no such change in the short term, and it is likely to prepare for several years of high oil prices
.
”