MOEA to Evaluate Policy Measure on Gasoline Price Assignment

The Ministry of Economic Affairs or the (MOEA) recently announced its plan to evaluate its policy that lets CPC Corp Taiwan, a state-run petroleum refiner, absorb a portion of the increase in crude oil prices when costing locally sold gasoline.

With the ban of the European Union on Iranian oil imports, the crude oil price chart can reach up to $150 per barrel. According to the official the ministry has to get ready for that possibility. He further adds that the ministry needs to look at the present measures and make new proposals.

Cheng Ming-hui, Vice President of the CPC, said that the present approach of letting the CPC carry fifty percent of whatever increases there are in crude oil prices in excess of $100 a barrel and charging the other 50% to gasoline consumers had already inflicted revenue reductions of NT$28.5 billion during the previous year.

The measure which became effective starting Dec 6, 2010 was the government’s way to maintain stable consumer costs as crude oil prices increased to more than $100 a barrel.

According to Chen, a loss of NT$38.7 billion that was posted by CPC in 2011 charged about NT$3.7 lower in the per liter cost of diesel and gasoline as of the 29th of January compared to its prices if it was dictated by market forces.

For each NT$0.1 a liter that the company carries instead of passing to the consumers, CPC is bound to lose an extra NT$1.2 billion annually, said Chen.

According to the economics official, to stop the losses of the CPC, the ministry has to conduct a careful analysis of the present measure and may possibly let gasoline prices increase to reflect the recent crude oil price history. He further adds that going back to a market-based price mechanism will be the standard and the ministry expects that CPC does not need to lose money in the long run which is beneficial for the country.