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Price increase may resolve oil crisis
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The National Development and Reform Commission announced that China would raise the prices of gasoline, diesel oil, and aviation kerosene by 500 yuan per ton, almost a 10 percent rise, starting from November 1 in an attempt to solve the recent "oil crisis."

Shanghai Securities News learned that private refineries, refineries of China National Petroleum Corporation (CNPC), and China Petroleum and Chemical Corporation (Sinopec) will profit from production, even though the profit level is left far behind the average international level.

A boss from a Shanxi chemical plant told Shanghai Securities News that after oil prices were raised, as long as the international crude price prices did not exceed US$91 per barrel, his company could profit; this is known as the profit price. If prices hover between US$91 and $103 per barrel, the company would suffer losses from continued production but these would still be less than the losses if they stopped production; this price is widely known as the critical price.

The data shows that the average price of the West Texas Intermediate (WTI) crude oil futures in October was US$83.849 per barrel by October 29, lower than the profit price of the company.

Some accused private refineries of bearing the major responsibility for this oil crisis in China. An executive of Sinopec once remarked, "Although Sinopec's refineries still insist upon organizing fully loaded production, local oil refineries and fuel oil refineries don't have the same obligation, therefore the total oil products available in the market are reduced."

After the price adjustment, the profit price and critical price from Sinopec reached US$85 and US$97 per barrel, which are slightly higher than the prices for PetroChina. Sinopec said it would refine 800,000 tons more crude oil this month, registering the company's highest year-on-year growth. The oil giant also plans to import diesel oil this month as a precautionary measure for possible market upheaval caused by the rising prices.

For more details, please read the full story in Chinese. (

( November 2, 2007)

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