"Rising or falling slowly" oil price mechanism should be corrected

While the price of domestic oil prices has been undermined, the day before yesterday, Sinopec held a symposium with social supervisors to discuss hot issues such as oil prices. For the public feel that the oil price is “faster or slower”, Sinopec said that this is mainly a question of the pricing mechanism.

Faced with the view that the price of domestic oil has “fasted or slowed down” in the society, the relevant departments have been stressing that this is an “illusion” and that there is a problem with the pricing mechanism. The theory is empty and the reality is hard. A "misunderstanding" is not enough to drain the public's chest. Sinopec expressed its position at this time, not only acquiesced by the fact that it was “faster or slower”, but also directed the price mechanism.

According to the current adjustment method for refined oil prices, when the average moving rate of crude oil in the three international markets (Dubai, Brent and Xinta) reaches 22% for a period of 22 consecutive working days, the oil price can be adjusted. On the surface, “22 working days” and “4%” are a hard indicator. They don’t have the same tendency to rise or fall. They do not appear to “rise faster or slower” but the fact is not so simple.

We may wish to use a simple example to illustrate that "the rise is fast and slow." If the average price of crude oil in the three places on one day is US$100/barrel, it will rise to US$104/barrel after reaching 22 consecutive working days to reach +4%, and domestic refined oil prices can be raised; however, when the three crude oil prices start at US$104/barrel When it fell back to US$100/barrel for 22 consecutive working days, it did not reach -4% (4÷104×100% = 3.85%) and did not have the conditions to cut oil prices. To fall to $99.84/barrel, the -4% standard is met. Obviously, this is "ups and downs," is it an illusion?

Another factor that affects public perception is the choice of the oil price reference system. The average prices of the three types of international crude oil are Brent, Dubai, and Cinta, which represent Europe, the Middle East, and Asia, respectively, where oil production is concentrated. However, the crude oil of the New York Mercantile Exchange, the most representative of the international crude oil market, is intentionally or unintentionally. Ignoring the latter, the latter is precisely the most convincing market price, and it is also the number that stimulates the nerves of the public.

In addition to technical reasons, there are still human factors. Each time refined oil prices are raised, relevant parties have stated that for the public interest, prices have not been adjusted to allow companies to absorb costs. Therefore, when lowering the price of refined oil products, it also adopted corresponding measures to delay the reduction of the time and reduce the price adjustment rate, so as to make up for the “loss” of oil refining companies.

The technical problem of “faster growth and slower down” is not difficult to overcome. The subjective selection of oil price reference can be used to incorporate the price of New York crude oil into the domestic oil price adjustment reference system; the condition of “continuous 22 working days” can be too harsh. Appropriately reduced; "4%" standard is too high, can be appropriately reduced ... These problems should be corrected through the repair mechanism. In addition, it is also necessary to beware of certain monopolistic state-owned enterprises. In order to maintain their absolute hegemonic status, they also quietly extend their tentacles to public decision-making, exerting influence through lobbying, public relations, and tips.

On the issue of refined oil prices, the public’s appeal is actually very simple and reasonable – to align with the international market, to rationalize the price mechanism, not to artificially distort, leading to “faster and slower” or “more upswings and less”, and not to dare to. The expectation is that “the rise is slower and faster,” and “the rise is less and less”—this kind of reasonable demand should be taken seriously. Nowadays, companies have clarified the issues and the relevant parties have remained indifferent. Even as they have in the past, it may not be appropriate to use the excuse of “the last time the price of oil was not increased” and “the increase in domestic oil prices is far less than the increase in the international market”. Now.

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