Formosa mulls its own gas price hikes

Formosa Petrochemical Corp (台塑石化), the nation's second-largest petroleum product supplier, is scheduled to announce today whether it will match state-run Chinese Petroleum Corp's (CPC, 中油) price hikes, a company official said yesterday.

"High-level officials will have a meeting [today], discussing whether to follow CPC's decision or to maintain the current rates despite the non-stop increase in crude oil prices," said Matiz Lin (林明憲), a public relations official at Formosa Petrochemical, during a telephone interview.

The company will take into consideration various factors such as consumer price fluctuations, electricity price hikes that just took place this month, consumer sentiment and its corporate financial portfolio before reaching a final decision, he added.

On Friday, CPC, the nation's largest refinery, announced its third price hike this year, raising wholesale gasoline and diesel oil prices by NT$1 per liter each. The decision translated into a hike in the pump price of 3.4 percent to 3.7 percent, depending on the grade of fuel.

CPC and Formosa Petrochemical both raised wholesale gasoline prices by NT$1 per liter in February and NT$2 per liter in April.

The two oil refiners have closely matched each other's moves in raising or reducing rates out of fear of losing business in the highly competitive market that the two firms dominate.

On Aug. 31 last year, Formosa Petrochemical surprised the market by announcing price hikes, but CPC did not follow suit as the Cabinet prevented the government-owned refinery from marking up its prices due to inflationary concerns.

At the time, Formosa Petrochemical's gas stations suffered a loss of business for weeks, and the private company only managed to end the month-long price war with CPC by reducing gasoline prices twice. Those reductions came after the Cabinet's announcement in late September that commodity taxes on gasoline, diesel and fuel oil would be cut by 25 percent for a period of three months.

This time, Formosa Petrochemical appeared more cautious, as it has seen rosy financial figures that give it more of a buffer. Its unaudited statements showed that the private refinery raked in net profit of more than NT$20 billion (US$618 million) for the first six months of the year, Lin said, as opposed to CPC's net losses of NT$19.6 billion during the same time.

Formosa Petrochemical's sales rose 68 percent to NT$52.6 billion last month from a year earlier, the company said last Thursday. That compared to NT$50.7 billion in sales in May.

The Consumers' Foundation (消基會), a consumer advocacy group, expressed discontent with CPC's inability to boost operational efficiency, with losses incurred instead passed on to consumers by hiking rates.

"A government-run body has an obligation to stabilize commodity prices, rather than taking the lead [in price hikes] and causing more fluctuations," foundation chairman Jason Lee (李鳳翱) said.

Lambasting CPC for ignoring people's feelings, Lee urged the company to open up its financial structure to public scrutiny in order to ease grievances that "price hikes always fatten CPC but make other sectors skinny."

CPC's three rate increases this year have caused their retail gasoline prices to jump by 16 percent from last year.

The Directorate General of Budget, Accounting and Statistics has estimated that every NT$1 hike on gasoline prices pushes up the consumer price index (CPI) -- a crucial reference for gauging inflation -- by 0.035 percentage points.