The National Development and Reform Commission announced that according to the recent changes in the international market oil prices and the current refined oil price formation mechanism, domestic gasoline and diesel prices will not be adjusted from 24:00 on March 31, 2020.

Source: Economic Daily

At 24:00 on March 31, domestic refined oil ushered in the 6th price adjustment window of the year. The National Development and Reform Commission announced that according to the recent changes in the international market oil prices and the current refined oil price formation mechanism, the domestic gasoline and diesel prices (standard products) will not be adjusted from 24:00 on March 31, 2020.

Monitoring of the National Development and Reform Commission Price Monitoring Center shows that during this round of refined oil price adjustment cycle (March 17 to March 30), international oil prices continued to fluctuate and fall, with the average oil prices of WTI in London and New York falling by 36.05% compared with the previous round price adjustment cycle. According to the "Petroleum Price Management Measures" issued in 2016, the average international oil price level has fallen below the regulation lower limit of US$40 per barrel. According to the mechanism, domestic gasoline and diesel prices will not be adjusted.

Since the beginning of this year, the adjustment of domestic refined oil prices has shown a pattern of "zero rise, three falls, and three strands". Among them, the domestic refined oil prices were lowered on February 4, February 18 and March 17. On March 17, gasoline and diesel were significantly lowered by 1,015 yuan and 975 yuan per ton, setting the largest single drop since 2008. The prices of gasoline and diesel have also returned to the 5 yuan era. As of the previous round of price adjustments, the gasoline price has been reduced by 1,850 yuan per ton this year, and the diesel price has been reduced by 1,780 yuan per ton.

China Economic Network Data Photo Li Jia/Photo

According to the analysis of the Price Monitoring Center of the National Development and Reform Commission, during the price adjustment cycle, a serious oversupply and demand in the crude oil market affected the further decline in oil prices. On March 30, WTI oil prices in London Brent and New York fell to their lowest levels in nearly 18 years, at $22.76 and $20.09 per barrel respectively. On the one hand, the overseas epidemic of COVID-19 continued to worsen, resulting in a significant slowdown in economic activity and a sharp decline in oil demand; on the other hand, Saudi Arabia launched a price war, and several major oil-producing countries expressed their expansion of production and participation in the battle for market share, and a sharp rise in crude oil production and inventory further lowered oil prices.

Zhuochuang Information Finished Oil Analyst Zhang Fuli analyzed that at first, the public health incident continued to weaken crude oil demand, and concerns about the global recession continued to intensify, resulting in a plummeting international oil prices. Then central banks of various countries took a series of emergency measures to try to alleviate the impact of the public health incident on the global economy. In addition, news that the United States may interfere in the oil price war between Saudi Arabia and Russia has been reported, which has led to a short-term boost in international oil prices. However, due to the persistent impact of the public health incident, and the expectation of increased production in Saudi Arabia and Russia, crude oil immediately gave up its gains again. Although crude oil fluctuates frequently during this period, the rate of change always changes within the negative range.

International oil prices continue to fall. Why will domestic oil prices not adjust in this round? This is because, according to the "Petroleum Price Management Measures", my country has set upper and lower limits on the price mechanism of refined oil. The upper limit ("ceiling price") is US$130 per barrel, and the lower limit ("floor price") is US$40 per barrel. That is, when the international market crude oil price is affiliated with domestic refined oil prices is higher than US$130 per barrel, the highest retail price of gasoline and diesel will not rise or rise less; when it is below US$40, the highest retail price will no longer be lowered. Starting from 24:00 on March 17, the domestic refined oil prices have been significantly lowered to the corresponding level of US$40 per barrel according to the mechanism, and the part below US$40 per barrel will no longer be lowered.

According to Peng Shaozong, deputy director of the Price Department of the National Development and Reform Commission and first-level inspector, when the oil price is below the lower limit of regulation, the amount of domestic refined oil prices is not directly reserved for enterprises to become income, but is included in the risk reserve. According to the provisions of the "Regulations on the Collection and Management of Oil Price Risk Control Reserves", the full amount is paid to the central treasury and included in the general public budget management, and is used for energy conservation and emission reduction, improving oil quality, ensuring the safety of oil supply, and responding to large fluctuations in international oil prices as a source of funds for implementing guarantee measures.

How will oil prices perform in the future? Based on multiple factors, the National Development and Reform Commission Price Monitoring Center predicts that oversupply will affect international oil prices hovering below the "floor price" of US$40 per barrel in the second quarter. The market's focus in the later stage will focus on the prevention and control effect of the overseas epidemic of the new crown pneumonia, as well as the production changes brought about by political struggles between the United States, Saudi Arabia and Russia. (Economic Daily-China Economic Network reporter Xiong Li)