The diesel market environment will be safer and more regulated

Editor's note: The Catalogue of Hazardous Chemicals (2015 Edition), which came into effect on January 1, 2023, adjusted "1674 diesel [closed cup flash point ≤60 degrees Celsius]" to "1674 diesel"
.
Since then, there has finally been a clear answer
to whether diesel is a dangerous chemical.
Ten ministries and commissions jointly determined that diesel fuel is a hazardous chemical
regardless of the size of the flash point.

This adjustment has set off waves in the refined oil market, and the industry has been hotly discussing the impact
of this adjustment.
What are the considerations based on this adjustment, and what impact will the adjustment have on the refined oil industry and sales enterprises? This edition introduces special topics, inviting relevant industry experts and sales company leaders to discuss.

Since the relaxation of the right to use and trade in imported crude oil in 2015, diesel production enterprises have increased, and the diesel market is mixed
.
Subsequently, light-cycle oil that can be used for diesel blending became a hot spot in the market, with imports of up to 15.
76 million tons at its peak in 2020, and about 30 million tons
of adjustable diesel.
In 2019, the approval power of gas stations was delegated to the prefecture and municipal governments, the "Refined Oil Market Management Measures" was abolished, and only a few provinces and cities issued detailed refined oil management measures, and the phenomenon of "everyone can operate and sell oil everywhere" appeared in the diesel market, which also made the collection of diesel consumption tax a major problem
.
According to end-consumption estimates, diesel consumption has stabilized at about 190 million tons since 2015, but the diesel consumption included in energy statistics has dropped from 174 million tons in 2015 to 143 million tons in 2020, and about 50 million tons of diesel consumption has entered a "vacuum zone"
.
Diesel sites that do not require hazardous chemical qualifications have become "fragrant food" all over the countryside, and "artesian black" has become a black hole
for oil safety and taxation.

Diesel consumption involves diesel vehicles, agricultural vehicles, agriculture, forestry, animal husbandry and fishery, railway transportation, water transportation, electric power, construction, industrial and mining enterprises, commercial and civil and other fields, except for railways, electric power, some industrial and mining enterprises, generally need to be purchased
through gas stations.
In 2015, diesel consumption in these consumer segments accounted for 91% of total diesel consumption, and is expected to reach 95%
in 2022.
However, the reality is that the proportion of diesel retail sales in the main business is decreasing
year by year.
Although there are reasons for the sales structure of increasing the proportion of wholesale and decreasing proportion of retail, the increasing number of operators and the increasing confusion of sales channels are also important reasons
.
The inclusion of diesel in the management of hazardous chemicals is not only the need to manage hazardous chemicals, but also the need for market supervision, which will have a significant impact on two aspects:

First, it will effectively improve the oil safety environment
.
The report of the 20th National Congress of the Communist Party of China emphasized that it is necessary to promote the special rectification of safety production risks and strengthen safety supervision
in key industries and key areas.
In recent years, diesel business entities have become increasingly diversified, and as long as they obtain an operating license, they can operate diesel
.
The impact on diesel safety is manifold
.
The first is the safety problems involving oil, not only diesel itself has safety risks, as a blended diesel component of light cycle oil flash point range is very large, some below 60 degrees Celsius
.
Under the influence of the epidemic, the sluggish aviation kerosene is also used in large quantities to blend diesel, and its flash point is less than 40 degrees Celsius, which has long been a hazardous chemical, but it is free from
the supervision of hazardous chemicals.
Secondly, a large amount of diesel fuel floods the market as a hidden resource, which will not only cause statistical distortion, but also bring hidden dangers
to energy security.
In June 2021, after the state imposed a tax on imported light cycle oil, the diesel market became tense two months later, which had an impact on the operation of the national economy, and it can be found that these resource fluctuations have greatly interfered with the market
.

After diesel is included in the management of hazardous chemicals, relevant administrative licenses are required for production, operation, use and other links, which will support infrastructure and increase hardware costs
.
According to the Measures for the Management of Hazardous Chemicals, obtaining a hazardous chemicals business license requires owning or renting a special dangerous goods warehouse, and only after obtaining a hazardous chemicals business license can you apply for a business license
.
Construction projects for the construction, reconstruction, expansion of production or storage of hazardous chemicals shall be reviewed by the work safety supervision and management department
.
The hazardous chemicals business license shall have a safety assessment report issued by a safety assessment institution that has obtained the qualification at or above the provincial level, and a professional training certificate for safety production management personnel; Obtaining a road transport permit for hazardous chemicals, owning more than 5 special vehicles (except trailers), and the special vehicles should be equipped with satellite positioning devices for driving records; Parking lots with a term of more than 3 years and suitable for the scope and scale of business must be located within the municipal administrative area
where the enterprise is registered.
Enterprises with full-time security management personnel and hardware facilities will have an advantage, which will increase the value of the storage capacity, and having a storage warehouse will become a channel
for market reshuffle.

From the perspective of the difficulty of obtaining qualifications, "artesian black" operators are the most difficult, followed by engineering construction, traders, industrial and mining enterprises, logistics parks, rural sites, social sites, and main businesses
.
Operators that do not meet the requirements or have difficulty in construction will withdraw from the market
.
Intermediate operators will be reduced, diesel circulation will be limited to limited places, and some refueling points that start with diesel and sell gasoline with incomplete licenses will also face pressure
to withdraw from the market.
It can be seen from the above that the reduction of operators will increase the market share of retained enterprises and the share
of gas station retail.

Second, it will effectively improve the refined oil market environment
.
The special action to rectify the refined oil market, which began in August 2022, is an upgrade and strengthening
of years of supervision.
From the perspective of the scope of action, it has expanded from more than 30 enterprises in Shandong to the whole country; From the perspective of the links involved, it has been extended to many national ministries and related agencies
.
However, without follow-up policies, it is difficult for the rectification special action to have long-term effectiveness
.
The inclusion of diesel in the management of hazardous chemicals will make the production, transportation and use in a closed loop, and the special vehicles for the transportation of hazardous chemicals will be equipped with satellite positioning devices for driving records, laying a technical foundation
for subsequent supervision.
Controlling both ends of production and use will make consumption more real and will also facilitate the collection
of consumption tax.
Diesel as a means of production, consumers are highly sensitive to price, especially logistics enterprises, fuel costs account for more than 1/3 of their total costs, diesel prices can be saved
.
After the relaxation of the "two rights", diesel price competition not only exists between local refining and main business, but also between
georefinery and georefinery.

After diesel is listed as a hazardous chemical, it is conducive to the establishment of a sound information system for market supervision
.
Europe has established a consumption tax transfer and monitoring system for all taxable energy products that may be used as engine fuel and heating fuel, and implements the dynamic supervision
of the production, storage, transportation and sale of taxable products throughout the supply chain.
China's management of hazardous chemicals is relatively perfect, and can be further upgraded to a whole-process supervision system
.

In general, the inclusion of diesel in the management of hazardous chemicals is the result of multiple requirements, and it is also an important measure
to improve the supervision of the domestic refined oil industry.
Illegal operation of hazardous chemicals will face more serious penalties, and even involve criminal liability risks
such as dangerous operation crimes and illegal business operations.
The management boundaries of hazardous chemicals are clear, the regulations are clear, and if all localities can properly support and strictly implement them, they will effectively improve the fire safety and national energy safety level of the industry and purify the market
.
If the market competes fairly, refiners will focus more on technological upgrading, which is conducive to the transformation of the refining structure and accelerates high-quality development
.