Oil giant Esso Taiwan said yesterday that it decided to suspend its gas-station expansion plan due to what it called a viciously competitive environment.
The decision puts on hold plans to add another 19 gas stations to its 31-station chain by year's end.
According to an Esso official, foreign oil firms are at a disadvantage as imported finished oil products are taxed 11 percent, while domestic oil producers are not subject to the tax.
"Due to the taxes levied on imported finished oil products, the company has lost its edge against the price-cutting strategies employed by local oil companies and distributors," the official, who asked not to be named, said yesterday.
Esso Taiwan vice president Jack Lai (
Government officials, however, disagree.
"The tax rate is fair and does not constitute unfair market competition among local and foreign oil companies," said Chen Mao-yang (陳茂陽), a director at the Ministry of Economic Affairs' Energy Commission.
Unlike local oil companies that export crude oil and need to build up their own petroleum refineries, companies using finished oil have no fixed assets in this country. So it is easier for them to withdraw or migrate to other countries, and so they should be taxed more, Chen said.
Esso Taiwan, a joint venture of Taiwan's Pan Overseas Corp and the Esso Group entered the oil market last April.
Competition from local companies -- state-run Chinese Petroleum Corp (CPC, 中油) and privately run Formosa Petrochemical Corp (台塑石化) -- and oil distributors such as Mech-President Corp (統一精工) and National Petroleum Corp (全國加油站) -- is unavoidable since the local oil supply far exceeds demand, Chen said.
CPC produces 770,000 barrels of oil per day and FPC produces 450,000, while the daily domestic demand is 800,000 barrels, Chen said.
To fight for oil market share, local oil companies and distributors have staged price wars on and off for several years.
The Esso official reiterated that the company will not withdraw from the domestic market as a Chinese-language newspaper reported yesterday.
"We have no plans to quit the Taiwanese market," the official said. "The Taiwanese oil market has been liberalized just over a year and we won't make such a decision at this point."
"We'll make our next step after a meticulous evaluation of the market," the official said.
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