It's still a bit premature to talk about the rise in oil prices now.
The recent media reports on the tendency of rising domestic oil prices are confusing and make people very gloomy. First, the two giants CNPC and Sinopec have withdrawn their previous discount promotion activities. In big cities like Shanghai, the price of 93-octane gasoline has returned to the national maximum retail price level of 6.61 yuan per liter; then, with the slight rebound of international oil prices, domestic oil prices are already following the trend impatiently; more annoyingly, those idle domestic and foreign research forecasting institutions have high expectations for the trend of oil prices, leading to the domestic judgment on oil prices falling into the habitual psychological misconception that it is just a matter of time whether or not the prices will rise.
Some people predict that at the end of March and early April, there will be an upward adjustment in domestic oil prices, with an increase of about 0.2 yuan per liter, citing the reason of the larger rebound in international oil prices.
First, I think this prediction is unreliable. Although we cannot control the pricing desire of the two giants, if we look at it superficially, the level of international oil prices in the past few months has not advanced much, and they have been in a period of frequent fluctuations. Now, if we want to adjust the price, first, it may not reach the state-regulated condition of an average fluctuation of 4% over 22 working days for oil price adjustments, second, the so-called strong rebound caused by these fluctuations is just an illusion, third, the current level of oil prices is already relatively high, and the eagerness to raise oil prices undoubtedly stems from the oil giants' mischief. Since November 10 last year, domestic oil prices have not been adjusted, and they are becoming increasingly restless.
Next, we need to question what level the international oil price is at, what its future operating trend is, and whether it is playing a decisive role in the rise of domestic oil prices at present. To answer this question, it is important to have a basic judgment and grasp of the global economic situation. Although countries like Europe and the United States have strengthened their confidence in economic recovery this year, there are still many unstable factors, and industries such as finance and industry that influence the momentum of economic development have not shown any improvement. In fact, I believe that the Western economies are currently in a great depression, which may last three to four years. Specifically regarding international oil prices, it mainly depends on two major influencing factors: the behavior of the dollar and oil demand, ultimately leading to the issue of oil production. These problems have not been well coordinated and resolved, the US economic recovery is extremely slow, and the world's oil demand, except for Asia, remains weak. This will allow oil-producing countries and OPEC to have moderate control over production. The most important thing is to avoid continuous declines in oil prices, and its upward trend is extremely vague.
The basis for adjusting domestic oil prices is entirely dependent on international oil prices. Once there is a ripple effect, the rise will follow. Fundamentally speaking, this is the scheme of the oil and petrochemical giants, not a natural trend. Compared to the previous few months, the current oil price does not indicate much, with the average oil price around $77-$78 per barrel. The current expectation is a baseless price hike, without any basis.
However, there is a reality that the domestic oil demand base is relatively large, and as oil consumption increases, after the low point in oil usage, China's demand will drive up international oil prices, naturally giving domestic oil prices the impetus to rise. But if domestic oil prices blindly chase the rise, it will have an adverse impact on the economy. We must know that China's economy is facing a slowing growth trend in 2010. Previously, the impact of oil prices was not significant, but they will play an important role in this scenario, and decision-makers cannot help but carefully consider the pros and cons.
Although the current domestic oil price level cannot be said to be reasonable, it is still appropriate and beneficial for the overall development of the economy. For the automobile industry, it is also relatively moderate, neither too high nor too low. It is really unnecessary to destroy such a good environment, as if fearing chaos or making consumers get some kind of bargain. Not everything should be benchmarked against real estate prices, right?
My view is still prioritizing stability. Don't panic at every little breeze, don't assume frequent changes in oil prices are necessarily good. Daily necessities can demonstrate the progressiveness of our oil price mechanism. Let's be honest, aren't domestic oil prices just followers? Can't you hold back even if you don't release anything? Natural gas prices are rising now, and the petroleum businesses of Sinopec and CNPC at home and abroad are thriving. What's important now is striving to gain a voice in international oil competition and having the ability to make money from others instead of eyeing our own wallets. I believe that when international oil prices stabilize relatively, around $82 per barrel, it is worth considering price adjustments. It is not wise to rush for adjustments now. Regardless of what the situation will be at the end of March and early April, at least we should consider China's particularities before making decisions.
Author: Che Fu
Email: [email protected]
Authorization Status: This article has been exclusively authorized to Sohu.com for publication. No reproduction without permission.
Recommended Reading: Please visit Che Fu's blog homepage to read more exclusive and insightful comments.