National Development and Reform Commission: Will Shorten the Oil Price Cycle by 4%

On March 6, 2013, the Press Center of the First Session of the Twelfth National People’s Congress held a press conference and Zhang Ping, director of the National Development and Reform Commission , answered questions on “economic and social development and macro-control”. The following answer questions are recorded.

[Reporter]: We have seen that after the price increase for oil on the 24th last month, some college students applied to the NDRC for the basis of an open price increase, and we noticed that the administrative regulations responded within 15 working days. I would like to ask the NDRC in this regard. Case. Every increase in oil price will cause ordinary people to worry about monopolization, and whether we can answer the questions from the reform of the State Council and rationalizing the energy and resource prices. Thank you.

[Zhang Ping] You asked a very sensitive question, and I think my answer may not satisfy you or say that there are many criticisms. Our oil price pricing mechanism has been in line with international standards since 1998, and according to international prices we have determined the prices of our domestic refined oil products and the prices of some other chemical products. Our energy consumption, especially oil consumption, continues to increase in foreign dependence. Last year, our own production of crude oil was 204 million tons, and imports were 280 million tons. Our foreign oil dependence has been about 58%. These oils are all purchased on the international market. For this part of our own production, we should say that the cost of our production will be lower than the price we purchase in the international market. Because of this, the country collected special oil proceeds from 2006, when the international oil price began to rise substantially, because the price of oil in the past was 30 to 40 US dollars. At that time, it was more than one hundred US dollars. There are components that increase production costs, changes in prices caused by changes in supply and demand, and geopolitical influences. It is also undeniable that there are some hot money speculation factors. You may not have forgotten that when the international oil price was highest in July 2008, it reached a barrel of 147-148 US dollars. Of course, our cost is not so high, so the national finance is to extract special proceeds from our own crude oil production. It is for the oil production enterprises. How much oil do you have to pay to the country? What does this money do? Subsidies for agriculture, forestry, fishery, public transportation, and rural transportation. Now we have subsidies for agricultural machinery, subsidies for forestry, subsidies for grasslands, subsidies for urban public transport, and subsidies for rural passenger transport. We adopt similar subsidies for taxis.

The current pricing mechanism for oil prices is based on 22 working days. If the average price of oil fluctuates by more than 4%, we will adjust the oil prices accordingly. The current operation has always been to operate in accordance with this mechanism. This mechanism now appears to have two obvious shortcomings: First, the cycle is too long. 22 working days plus the holidays is a month's time. Now the international oil prices are changing every day, so we have a long time. Failure to timely reflect changes in international oil prices. Second, we set a price adjustment rate of 4% for oil price changes. If the international price volatility reaches 4% on 22 working days, we will adjust. If it fails to reach 4%, the price of oil will remain stable, and this will cause the change in international oil prices to not be reflected in the prices of refined oil products in China. There are two major flaws in these aspects.

Last year we adjusted the price of oil eight times. It was a four-and four-time drop. It was raised four times and lowered four times. The consumption of refined oil involves thousands of households. When prices rise, it is not good news for consumers. Therefore, everyone has criticisms. There are also many reflections in the society, including many sections, many of which are Say it to me. Saying that the National Development and Reform Commission will adjust the price of oil, the airline will have an accident. Two days before the oil price adjustment, an earthquake occurred and linked them all together. I just said that oil prices are determined according to the formation mechanism. Especially in recent years, they have strictly followed this mechanism. In a certain sense, the last oil price adjustment this year, the window period should be around February 9, because it is the Spring Festival, so We waited until the night of February 24, that is, after the fifteenth day of the first month. This happened to meet the international oil prices and then went down two days, from the original 116 US dollars to 113 US dollars, but our original oil price level is generally 108 to 109, or in the window of price adjustment, we still follow the mechanism to go Therefore, there are also many criticisms in the community. I have heard all of them and I understand them.

We are now studying the reform scheme of the oil price formation mechanism. In response to the two outstanding deficiencies I just mentioned, the first is that the cycle is too long. We plan to adjust the cycle to be shorter in order to be able to adapt to the frequent changes in international oil prices. The second is to prepare to cancel 4%, and adjust and adjust according to a certain period. No matter if Daan fails to reach 4%, we should raise it to rise. This drop will make the oil price pricing mechanism more flexible and adapt to changes in the international market. I do not know if I did not say clearly. There may be many reporter friends who are also concerned about the issue of oil prices. In essence, this is a basic consideration. Thank you.

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