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Strengthening NT dollar eases fuel price concerns

While gasoline prices have been expected to rise in the coming months, the recent appreciation of the NT dollar may postpone any increase until after the Chinese New Year.

The NT dollar closed down yesterday at NT$30.8 to the greenback -- its first fall in six trading sessions -- compared to NT$31.485 at the end of last year. Its strengthening against the US dollar may translate into an estimated saving of NT$360 million when it comes to buying crude oil, according to Chen Chao-wei (3¯´Â«Â), president of the Chinese Petroleum Corp (??ªo?½¥q).

"It's possible that there will be no need to raise the price of gasoline before the Chinese New Year [on Feb. 4]," Chen said. "The rising NT dollar helps to ease the pressure on the price of crude oil."

However, an imminent rise in the price of gasoline is inevitable. According to data provided by Chinese Petroleum, the price of international crude oil more than doubled from US$11.37 a barrel last February to US$25.6 a barrel on Dec. 31. The price of domestic gasoline increased by only 17.35 percent during the same period.

"The price of international crude oil has kept rising, but so far it hasn't been fully reflected in the domestic market price," Chen said.

Another factor likely to push up the price of gasoline is the fact that the state-owned corporation is required to meet an earnings target set by the government. The target for the current fiscal year has been set at NT$17.7 billion.

"As of November last year, the company was still NT$4.6 billion short of the government's targeted revenue," Chen said. "And we believe that the figure will become larger for December."

The complete opening of the oil product market, set for July 1, is likely to make the revenue target even more difficult for the company to meet.

"Last year the company's earnings came to roughly NT$38.5 billion, while this year we budgeted earnings of only NT$17.7 billion," Chen said. "One of the reasons for this is the anticipated competition [which would result in less revenue]."

According to Chen, the corporation expects to see its market share of oil products drop from the current share of 95 percent to 30 to 35 percent after the opening of the market.

"The impact of the market opening will be very significant for CPC," Chen said.
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