The “price war†between refined oil companies and the “oil barrels†continues to expand, and the scope is expanding. Even Beijing, a city where “two barrels of oil†rarely impose price cuts, has recently joined the market.
The reporter recently learned from Sinopec Beijing Petroleum Company that at present, the company has launched rare promotions in the Beijing area: The members launched a campaign of “reserving 2 yuan per liter for fuel-saving shoppingâ€, and diesel members can even obtain each Increase the discount rate of 2.7 yuan. These price cuts have rarely occurred in the history of the company. At the same time, another PetroChina-based gas station of “two barrels of oil†has also joined this round of price reduction promotions.
"Price war" burns to the whole country
In the past two months or so, under the pressure of a series of price-cutting promotions at private gas stations and local refineries, PetroChina and Sinopec have conducted price-blocking wars in various provinces and cities across the country, and at the same time, they have been working hard to “recover lost landâ€.
It is understood that the game of refined oil prices between the “two barrels of oil†and the privately owned refining companies has started since May of this year and has involved Shandong, Henan and Guangdong provinces. Among them, the “killing†in the Shandong market is the most intense.
Shandong Province is the most intensive province in China. According to statistics, one province's production capacity accounts for about 70% of the country's private oil refining share, making it an indispensable force in China's oil refining industry. In the Shandong market, gas stations based on ground-refining companies have continuously increased their efforts to reduce prices.
Longyan Petrochemical analyst Li Yan told this reporter that the price cuts for privately-owned petrol stations in Shandong are between 0.5 yuan and 1.5 yuan each, and some can even offer more than 3 yuan, and they are still continuing.
In fact, the price cuts of private gas stations have started since last year. The reporter learned from interviews in provinces such as Hubei and Zhejiang last year that these gas stations had preferential rates ranging from a few cents per liter to more than one yuan per liter. Some private gas stations even sold at half price at the beginning of their business.
"Two barrels of oil" in the province's sales companies to take some countermeasures, such as regular promotion activities, retain large customers, etc., but because the price reduction mechanism is not flexible enough, customers continue to lose, the market share is gradually eroded.
According to statistics, the share of gasoline production for “two barrels of oil†has dropped from 89.5% in 2011 to 79.5% in 2016, a decrease of 10 percentage points, and this figure has dropped even faster since 2016. At the same time, the share of local refineries increased from 10.5% to 20.5%. Some industry insiders even pointed out that the market share of ground refining may be higher.
High profits play a supporting role
In fact, the refinery companies already existed after the completion of the restructuring of Sinopec and Sinopec at the end of the last century. They have been in a state of tepidness and have been so active in the past two years. This has an important bearing on the liberalization of the crude oil import rights of private enterprises.
The system of China's oil industry has always controlled the import of crude oil by state-owned enterprises, which not only controls the exploitation of domestic oil companies, but also controls the power of imported crude oil. For a long time, as a private enterprise, it is difficult to obtain crude oil, and only some scrap is obtained from Sinopec, PetroChina, and CNOOC. It is difficult for geminating companies to grow and grow, and it is even more difficult to pose a threat to state-owned oil companies.
On July 23, 2015, the Ministry of Commerce issued the “Circular on Processing Qualifications for Non-State Trading of Crude Oil Processing Enterprises†to initiate the application for non-state-owned trade import qualifications. This policy allows more local refining enterprises to obtain crude oil import power. As of March this year, nearly 20 geology companies have already obtained crude oil import rights.
The production capacity of the refining enterprises was released, and the previous operating rate increased from less than 20% to more than 80%. According to statistics, in 2016 alone, the processing capacity of China's refining companies accounted for nearly 30% of the national refining capacity. The rapid expansion of local refining companies has impacted the market that was originally dominated by "two barrels of oil."
What is the backing of the government’s continuous efforts to seize the market through price cuts? In the eyes of market participants, high profits are undoubtedly the main factor for companies that dare to drastically reduce prices.
Since mid-2014, international crude oil has begun to decline from cliffs to a current barrel of about $50 a barrel from $140 a barrel. The ever-declining international crude oil price has formed a huge gap with the ceiling price of domestic refined oil as stipulated by the National Development and Reform Commission. This has caused the profit of China's oil refining industry to rise against the trend. In 2016, the domestic refinery companies were basically in a highly profitable state.
According to statistics from the China Petroleum and Chemical Industry Association, in 2016, the profit growth rate of China’s oil refining industry was the highest, reaching 120%, and the total profit was 170.36 billion yuan, a record new record.
According to data provided by Li Xiangping, chairman of the Shandong Provincial Refining and Chemical Industry Association, in 2016, Shandong Province's main refining business achieved a total revenue of 492.5 billion yuan, a profit tax of 31.8 billion yuan, and a profit of 13.8 billion yuan, an increase of 21.7% over the previous year. 79.1% and 60%.
In 2017, the entire refinery industry continued to have a high profit status. According to Li Yan, an analyst at Longzhong Petrochemical, as of July 20, the price spread of gasoline for the No. 92 gasoline refinery in Shandong Dizi reached 2,807 yuan, or about 2 yuan per litre. Such a large profit gap led to the outbreak of this price war.
Overcapacity
It is worth noting that the “two barrels of oil†involved behind the price war is not just a battle for market and profits, but also a crisis of overcapacity in the entire refining industry.
"Although the entire market is currently enjoying such a high level of profit, it is still hidden behind the crisis of overcapacity. Once the market conditions are not good, such a crisis will erupt." Li Yan said.
In recent years, the state has vigorously promoted new energy sources and continuously increased its support for electric vehicles and natural gas vehicles. After entering 2016, under the influence of various factors, the consumption of refined oil in China for the first time decreased.
According to statistics from the National Bureau of Statistics, domestic refined oil consumption in 2016 was 315 million tons, a year-on-year decrease of 1.1%, while refined oil production reached 348 million tons, and the difference between production and demand exceeded 30 million tons. "China's excess oil refining capacity has become a reality." Li Xiangping said.
On the one hand, the entire industry still maintains high profits, and on the other hand, the hidden worry of overcapacity has emerged, which makes the market competition between the “two barrels of oil†and the refining companies more fierce.
According to Li Yan, in this round of competition, the current "two barrels of oil" gas station price drop began to cool, the preferential margin has narrowed, but the number of preferential sites increased. It is reported that at present the "two barrels of oil" and other state-owned enterprises, the main gas station offers are not covered at all times, and private gas stations are mostly conducted around the clock, profits will be more affected.
The owner of a private gas station has stated that he wants to “price warâ€. However, it remains to be seen whether private gas stations can continue to do so under the premise of increasing preferential prices and impaired profits.
In fact, people in the industry generally believe that the current domestic refined oil prices are not completely determined by the market, which has led to the current situation of high profits and overcapacity. Only by changing this foundation can we fundamentally break the situation of vicious competition and overcapacity.
It is worth mentioning that in order to promote the reform of China's oil and gas industry, in May this year, the State Council issued the "Several Opinions on Deepening the Reform of the Oil and Gas System", which clearly stated that the mechanism for the formation of refined oil prices should be improved and the role of the market in determining prices should be brought into play.
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