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Fuel price rise, queues at the pump
By Fu Chenghao |
February 10, 2012, Friday
|
Print Edition
Print Edition
THE National Development and Reform Commission, the government department that sets fuel prices in China, was true to form when it announced increases of more than 3 percent at 9pm on Tuesday, just hours ahead of the new prices coming into effect.
The short-notice strategy is aimed at preventing speculation by fuel distributors, who could use the time between announcement and implementation to hoard stocks and create a shortage of supply.
This kind of information is also price-sensitive to stocks, ranging from refiners to airlines and automakers, so the development commission embargoes release of the news until after the region's stock markets close.
Sadly, it's also a blow for motorists, who have a very short window of opportunity late at night to fill their tanks before prices rise.
If my memory serves me right, the commission's past announcements on fuel price cuts came early, at about 6pm.
However, crafty the commission tries to be, the marketplace tends to be abuzz with talk about a pending price increase hours before it's made public. That was true on Tuesday, too. Some motorists queued up at gas stations on a chilly evening to beat the deadline.
One of my friends told me that he was already in his pajamas when he first heard about the fuel-price hike on Sina Weibo, China's popular Twitter-like micro-blogging service, at about 11pm.
"I considered going out to fill up my tank, but I wouldn't have saved a lot of money and I didn't want to sit in a long line of cars until midnight, waiting to be served," he said.
The latest price increases would cost my friend the equivalent of US$2 each time he fills up his Peugeot 307.
"Though it's not a lot of money, gasoline prices are just so high now," he said. Indeed, the latest increase brings fuel prices back to record levels in China.
Days in advance
Newspaper reporters, like me at Shanghai Daily, have to reach local fuel company officials when price changes are announced to catch the transition from old prices to new and get an accurate reading of how changes play out at the pump. It takes awhile for the local pricing authorities to tell us.
I can still remember several years ago when I wrote my first fuel-price increase story. I had to hang around a gas station waiting for workers there to change the prices per liter, and then phone a sub-editor with the new figures before the paper went to press.
Indeed, it would be a godsend to all if the development commission would announce price changes days in advance and perhaps increase the frequency of adjustments. That strategy would tend to lessen the motive for fuel sellers to hoard products because they have to ensure sales volume, too. As for motorists, knowing price changes a few days in advance would avoid the kind of jam-ups at stations that occur when snap changes are unveiled.
It's not likely - at this stage, at least - that China will allow floating gas rates, like those in the United States and other countries, where prices are determined by the marketplace, not the government. Fuel in China is mainly supplied by two state giants, Sinopec Corp and PetroChina Co, and authorities are in the process of trying to make pricing more market-oriented.
The development commission actually has already been working to improve the frequency of fuel adjustments as part of efforts to make the current pricing mechanism more transparent and predictable.
Under the current system, which has been in effect since late 2008, the commission can adjust fuel prices when the moving average of a basket of international crudes changes more than 4 percent over 22 working days. That's a pretty hard formula for your average motorist to anticipate in advance.
Although the commission hasn't offered many reform details, industry sources and analysts said they believe the pricing formula could be reduced to 10 working days or two weeks, from the current 22 days.
The commission probably has never given a thought to publicizing price changes days in advance. For one thing, that could cause a lag not in keeping with the idea of letting domestic rates follow global crude prices in a timelier manner.
Other considerations
But remember, the commission also takes into account other factors in its pricing matrix, such as inflation and available supply. These considerations have prompted the commission to either delay or pare the size of price increases in the past, even when the 4 percent trigger point was met.
At the same time, the commission has been loathe to adjust prices more frequently, fearing social instability. Prior to Tuesday, the last fuel-price change came in October, when prices were reduced by more than 3 percent. The previous increase occurred in April 2011.
Against this sort of backdrop, publicizing price changes days in advance really doesn't make much difference.
The People's Bank of China, the central bank, used to announce changes in interest rates and bank reserve-ratio requirements just after financial markets closed, and the adjustments usually didn't take effect for a few days. Of course, a person could hardly take out a new mortgage in a day or two, unlike motorists queuing at the pump.
Still, many a motorist would just as soon not have to rush out to fill up the tank on a chilly winter's night and hopes the current system will change.
The short-notice strategy is aimed at preventing speculation by fuel distributors, who could use the time between announcement and implementation to hoard stocks and create a shortage of supply.
This kind of information is also price-sensitive to stocks, ranging from refiners to airlines and automakers, so the development commission embargoes release of the news until after the region's stock markets close.
Sadly, it's also a blow for motorists, who have a very short window of opportunity late at night to fill their tanks before prices rise.
If my memory serves me right, the commission's past announcements on fuel price cuts came early, at about 6pm.
However, crafty the commission tries to be, the marketplace tends to be abuzz with talk about a pending price increase hours before it's made public. That was true on Tuesday, too. Some motorists queued up at gas stations on a chilly evening to beat the deadline.
One of my friends told me that he was already in his pajamas when he first heard about the fuel-price hike on Sina Weibo, China's popular Twitter-like micro-blogging service, at about 11pm.
"I considered going out to fill up my tank, but I wouldn't have saved a lot of money and I didn't want to sit in a long line of cars until midnight, waiting to be served," he said.
The latest price increases would cost my friend the equivalent of US$2 each time he fills up his Peugeot 307.
"Though it's not a lot of money, gasoline prices are just so high now," he said. Indeed, the latest increase brings fuel prices back to record levels in China.
Days in advance
Newspaper reporters, like me at Shanghai Daily, have to reach local fuel company officials when price changes are announced to catch the transition from old prices to new and get an accurate reading of how changes play out at the pump. It takes awhile for the local pricing authorities to tell us.
I can still remember several years ago when I wrote my first fuel-price increase story. I had to hang around a gas station waiting for workers there to change the prices per liter, and then phone a sub-editor with the new figures before the paper went to press.
Indeed, it would be a godsend to all if the development commission would announce price changes days in advance and perhaps increase the frequency of adjustments. That strategy would tend to lessen the motive for fuel sellers to hoard products because they have to ensure sales volume, too. As for motorists, knowing price changes a few days in advance would avoid the kind of jam-ups at stations that occur when snap changes are unveiled.
It's not likely - at this stage, at least - that China will allow floating gas rates, like those in the United States and other countries, where prices are determined by the marketplace, not the government. Fuel in China is mainly supplied by two state giants, Sinopec Corp and PetroChina Co, and authorities are in the process of trying to make pricing more market-oriented.
The development commission actually has already been working to improve the frequency of fuel adjustments as part of efforts to make the current pricing mechanism more transparent and predictable.
Under the current system, which has been in effect since late 2008, the commission can adjust fuel prices when the moving average of a basket of international crudes changes more than 4 percent over 22 working days. That's a pretty hard formula for your average motorist to anticipate in advance.
Although the commission hasn't offered many reform details, industry sources and analysts said they believe the pricing formula could be reduced to 10 working days or two weeks, from the current 22 days.
The commission probably has never given a thought to publicizing price changes days in advance. For one thing, that could cause a lag not in keeping with the idea of letting domestic rates follow global crude prices in a timelier manner.
Other considerations
But remember, the commission also takes into account other factors in its pricing matrix, such as inflation and available supply. These considerations have prompted the commission to either delay or pare the size of price increases in the past, even when the 4 percent trigger point was met.
At the same time, the commission has been loathe to adjust prices more frequently, fearing social instability. Prior to Tuesday, the last fuel-price change came in October, when prices were reduced by more than 3 percent. The previous increase occurred in April 2011.
Against this sort of backdrop, publicizing price changes days in advance really doesn't make much difference.
The People's Bank of China, the central bank, used to announce changes in interest rates and bank reserve-ratio requirements just after financial markets closed, and the adjustments usually didn't take effect for a few days. Of course, a person could hardly take out a new mortgage in a day or two, unlike motorists queuing at the pump.
Still, many a motorist would just as soon not have to rush out to fill up the tank on a chilly winter's night and hopes the current system will change.
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