BIZCHINA> Oil Prices
Fuel price cuts spark debate on controls
By Wang Yu (China Daily)
Updated: 2007-03-15 08:40

Zhang Zhiguo, a press official with Beijing-based Sinopec, said his company had no intention to follow suit. "CNPC's move is temporary, and we will not follow them. We will stick to our own marketing strategies."

It's a golden opportunity for CNPC to start a promotional campaign during the country's annual session of NPC and CPPCC, highlighting corporate social responsibility, said Han Xuegong, a CNPC analyst. "It's a positive move to pay something back to consumers. Moreover, a price drop can boost sales."

Han pointed out that the price cut by Total-Sinochem Fuels and CNPC was aimed at raising brand awareness, rather than starting a price war. A full-scale price cut is the last possible option within the strategically important energy segment in China, Han said.

China's oil products are priced based on the average price of international crude, plus adequate profit for refineries,tariffs and logistical costs. Oil firms can vary the final retail price by up to 8 percent.

CNPC and Sinopec dominate the local retail market with the lion's share of filling stations. Thus they have no strong motive to drop the government-set price.

Although the price drop will benefit ordinary end-users, it will not prevail in the market in the short run, said an official from global oil firm BP.


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