Development and Reform Commission assesses refined oil pricing mechanism or shortens price adjustment window

"The 4%+22-day pricing model has improved the transparency of government decision-making, but at the same time there is a lag and the behavior of arbitrage is also magnified."
On August 19, this reporter learned that the National Development and Reform Commission has completed the assessment of the domestic refined oil pricing mechanism.
The reporter learned that for the details of the refined oil pricing mechanism, there are different opinions within the NDRC: First, is the price adjustment period too long, and the reference to the international oil price changes is too small; Second, when the price adjustment conditions are met, whether the country must adjust the price.
In May 2009, after the introduction of the “Administrative Measures on Oil Prices (Trial)”, the domestic refined oil price mechanism went from being vague to transparent. Its provisions: When the average price of crude oil in the three markets of the international market rises by more than 4% for 22 consecutive working days, the Development and Reform Commission may adjust the prices of gasoline, diesel, aviation kerosene and other refined products accordingly.
In the evaluation of the price adjustment deadline, an informed source told reporters that there are two views within the National Development and Reform Commission. One view is that the 22-day price adjustment period is too long and there is a significant lag in price adjustment. It is suggested that the price adjustment can be made every 10 working days or even shorter. Another view is that keeping 22 days unchanged, or extending the deadline appropriately .
Regarding the magnitude of international crude oil changes that the price adjustment refers to, some experts involved in the assessment believe that the margin is small. “If the average change rate of international crude oil prices exceeds 8% after 22 working days, how should the country adjust?” a person involved in the assessment suggested that reference can be made to the 10% international crude oil rate of change and reduce the frequency of adjustments.
However, the reporter learned that the "4%" adjustment is unlikely to change. An expert from the Energy Research Institute of the National Development and Reform Commission stated that “4%” is an adjustment threshold determined by analyzing the historical impact of changes in oil prices on the macro economy. If this change is too great, the adjustment of oil prices will have a greater impact on the national economy.
However, Deng Yusong, Director of the Comprehensive Research Office of the Research Institute of the Development Research Center of the State Council, believes that the “4%+22-day” pricing model has improved the transparency of government decision-making, but at the same time there are lags behind and the behavior of oil arbitrage has also increased.

"If the lag in price adjustment is not eliminated, risk-free arbitrage behavior will be exacerbated." Deng Yusong said that when international oil prices continue to rise, traders' most rational approach is to increase inventory as much as possible, once domestic prices are raised in a short period of time. There is a lot of profit inside; on the contrary, when the international oil price falls, traders will clean up as much as possible.
For the speculative arbitrage in this case, the relevant departments can in fact fully monitor. The experts from the National Energy Development Research Institute of the National Development and Reform Commission believe that statistical methods can be used to measure how much oil is hoarded, and price measures are used to regulate resource supply. If resources are heavily hoarded, the NDRC may choose not to adjust prices to promote the resources to the market. However, the management cost of this supervision process is large, and the question of who will supervise and how to supervise will all need to be studied.
Although speculation and market fluctuations are emerging, the NDRC is still extremely cautious about adjusting prices.
Wang Jun, a researcher at the China International Economic Exchange Center, said that in the current pricing mechanism, the state holds the initiative to adjust the refined oil prices in order to prevent the international oil prices from fluctuating to the domestic market.
"However, the premise of domestic oil price adjustment is the correct judgment of the trend of international oil prices. It must accurately determine whether the changes in international oil prices are short-term fluctuations or long-term trends. For example, when the price of oil is in a downward cycle, the short-term increase in international oil prices will not be adjusted domestically. "Wang Jun said.

Since December 18, 2008, the State Council issued the "Circular on the Implementation of the Reform of Refined Oil Prices and Taxes and Fees." So far, domestic oil prices have undergone six adjustments and four adjustments in total. The price of domestic refined oil has moved from being less active and slower to adjusting several times, and it has been difficult to get out of a line that is indirectly linked to the international crude oil price control.
However, there are still many vague terms in the current pricing mechanism.
According to the new refined oil pricing mechanism, when the crude oil price in the international market is higher than 80 US dollars per barrel, the processing profit margin will be deducted until the refined oil price is calculated based on the zero profit processed; when the barrel price is higher than 130 US dollars, the producer should be taken into consideration. , The interests of consumers, adopt appropriate fiscal policies to ensure the production and supply of refined oil, and the price of gasoline and diesel does not mention or mention in principle.
The pricing mechanism clarifies the two types of control when the international oil price is between US$80-130 and US$130 per barrel. However, the expression of the price policy in the above two ranges is too general and lacks specific details.
Wang Jun believes that there are no detailed provisions on the adjustment frequency and adjustment basis of oil prices under the two types of control. When the domestic oil price is “not mentioned” or “less mentioned” when the domestic oil price is above US$130 per barrel, the period and the standard for adjustment of the domestic price when the international oil price is in the range of US$80 to US$130 are unclear.
In addition, the price control in both cases is achieved at the expense of the profit of the domestic refined oil production enterprises. Under such circumstances, how to avoid the production enterprises from reducing their supply due to reduced profits or even losses, and thus leading to the “oil shortage” phenomenon It is a problem that must be solved. There is no effective method in the Measures. Once the regulation is entered, whether the price is adjusted may become a game between the supplier and the price management department.