CPC, Formosa increase prices

The nation's two oil refiners yesterday hiked wholesale gasoline and diesel oil prices by NT$1.5 per liter, citing lingering high crude oil prices, according to company statements released yesterday.

September West Texas Intermediate (WTI) oil futures slipped US$0.49 to US$61.08 a barrel in electronic trade yesterday, after hitting a record high of US$62.30 a barrel in the previous session, triggered by the death of King Fahd of Saudi Arabia, the world's largest oil exporter on Monday.

Formosa Petrochemical Corp (台塑石化), the nation's second-largest oil refiner, announced that its new wholesale price would take effect at 3pm yesterday, while rival state-run Chinese Petroleum Corp (CPC,中油) decided later in the day to match the hike, starting at 6pm yesterday.

After the increase, Formosa's wholesale gasoline and diesel oil prices are on average 7.39 percent higher than its previous rates, while gas stations buying from CPC need to pay an average of 7.64 percent more.

Formosa also hiked the price of low-sulfur fuel by NT$600 per kiloliter, and CPC raised the prices of consumer-use and industrial-use liquefied petroleum gas by NT$0.5 per kilogram, starting today.

"The range of the hike is still low, considering prices of WTI crude oil have rocketed by 12.72 percent since Mar. 11, Formosa's last price adjustment, as of Monday," Formosa said in the statement.

CPC chairman Kuo Chin-tsai (郭進財) had said previously that in order to avoid impacting consumer prices, the company would not change wholesale gasoline prices as long as prices of WTI crude stayed under US$60 per barrel.

Minister of Economic Affairs Ho Mei-yueh (何美玥), meanwhile, said the higher prices would not impact the local economy, as the consumer price index will only rise an estimated 0.37 percent on every 10 percent increase in oil prices.

The adjustment is reasonable, given that average crude oil prices over the past week have reached US$60.09 per barrel, Ho said. Furthermore, should wholesale prices remain unchanged, CPC would see its deficit widen, after reporting a net loss of NT$800 million last month, she said.

But Shen Chung-hua (沈中華), professor of money and banking at National Chengchi University, said the price increases will trigger a chain reaction.

"It's inevitable that transportation costs will rise, consumer prices will go up, interest rates will be boosted and the nation's economic growth will decrease, affecting Taiwan's third-quarter GDP performance," Shen said.

Vice Premier Wu Rong-i (吳榮義) recently assured the public that economic growth in the second-quarter of 2.06 percent was a low point and that the figure would bounce back in the current quarter. The government's Directorate General of Budget, Accounting and Statistics has predicted 4.04 percent growth for this quarter, and 3.63 percent for the whole year.

The higher oil prices will place greater pressure on the government to attain its GDP growth target but are not likely to trigger inflation concerns at the moment, said Chu Yun-peng (朱雲鵬), head of National Central University's Research Center for Taiwan Economic Development.

Taiwan's consumer price index (CPI) rose 1.84 percent year-on-year during the first half of the year.

"There won't be too much impact on the index if the oil prices are only raised within a small range," Chu said.