Why has China's oil price been continuously rising?
4 Answers
The reasons for the rise in China's oil prices are as follows: 1. Long-term turmoil in the Middle East: A large number of oil fields have been forced to reduce production or shut down, leading to insufficient crude oil supply, which directly causes fluctuations in international crude oil prices. Additionally, oil prices have already exceeded $60 per barrel and show a continuous upward trend. International oil prices are manipulated by the United States, and China does not have pricing power. On the contrary, China's dependence on oil is increasing. 2. High taxation on oil: There are value-added taxes, consumption taxes, urban construction taxes, etc. On average, half of the price of a barrel of oil goes to taxes. The domestic demand for crude oil is high, and the profitability of major domestic refineries is still insufficient compared to developed countries. The increase in refining costs naturally leads to higher domestic oil prices. 3. Low oil prices would severely impact the new energy industry: For example, new energy vehicles are inherently more expensive than conventional vehicles. If oil prices were to drop, new energy vehicles would lose their market value. Given China's large population, the use of low oil prices could also lead to waste.
Does it feel like your heart is bleeding every time you fill up these days? I've looked into it, and there are three main reasons for this. International oil prices are currently as volatile as a rollercoaster - the Russia-Ukraine conflict has tightened global crude supply, sending Brent crude prices soaring past $100 frequently. Moreover, the RMB exchange rate against the US dollar recently took a significant dip, increasing imported crude costs by about 15%. Most importantly, taxes and fees account for nearly 200 yuan out of a 50-liter tank fill-up, including consumption tax and VAT, making up 48% of the total price. A friend at the NDRC told me last time that the current pricing model uses crude oil costs plus processing margins, requiring adjustments every 10 working days based on international oil prices.
To put it simply, it's a matter of 'rising tide lifts all boats.' Last month at the gas station, I overheard several truck drivers complaining that with over 70% dependence on crude oil imports, whenever the Middle East sneezes, our oil prices catch a cold. Especially for those of us in transportation, what we're filling our tanks with isn't just gasoline—it's a 'mixed liquid' composed of consumption tax, education surcharge, and urban construction tax. More critically, there's the oil price adjustment mechanism that stipulates no price cuts when international oil prices are below $40 and no price hikes when they exceed $130, with everything in between fluctuating with the international market. Oh, and the recent costs of refinery equipment upgrades have also been passed on to oil prices.
When calculating the fuel costs last week, I realized the financial reports of the three state-owned oil giants are quite revealing. Crude oil costs account for about 40% of gasoline prices, meaning a 10% increase in international oil prices leads to a 0.7 yuan per liter hike for domestic 92-octane gasoline. The newly implemented China VI-B gasoline standard last year added an environmental technology premium to refining costs. What's more frustrating is the taxation mechanism—for every 300 yuan spent on fuel, 120 yuan goes straight to the national treasury. Here's a lesser-known fact: storage costs at oil depots have risen by 30% compared to pre-pandemic levels, and these expenses ultimately get passed on to consumers.
