Foundation blasts floating fuel price mechanism

Consumers' Foundation chairman Cheng Jen-hung (程仁宏) petitioned the government yesterday to review the floating fuel pricing mechanism, asking that the mechanism not become an excuse for the state-run petroleum company, CPC Corp, Taiwan (CPC, 中油), to rationalize its price hikes.

Cheng presented the petition to the Ministry of Economic Affairs along with Taiwan Solidarity Union (TSU) Legislator Tseng Tsan-teng (曾燦燈). Cheng said the foundation was opposed to the practice of taking fuel prices on Sept. 14, 2005, as the basis for the pricing mechanism that began operation on the first day of the year.

Cheng said that domestic prices on Sept. 14 were NT$2.6 higher than those on Feb. 13 of the same year, despite identical international oil prices, and given that the international prices were the same, the CPC should take the lower price as the baseline index price.

Cheng said that he doubted whether the CPC's emergence as one of the world's top 500 enterprises was because of its improved management efficiency, or price gouging via the floating fuel pricing mechanism.

The foundation strongly opposes the practice of "using this mechanism to squeeze further money out of consumers," Cheng said.

Wang Yun-min (王運銘), deputy director of the ministry's Bureau of Energy, said the Sept. 14 fuel prices used to establish the basic price level were the lowest among regional counties.

He said it was unfair to ask the CPC to adopt the lower prices as those were deliberately lowered to stabilize domestic consumer prices, whereas the Sept. 14 levels accurately reflect the price of oil on the international market.

Wang said it was wrong to question the ministry's move to use the West Texas Intermediate (WTI) prices as the benchmark in pricing. He said the prices surged by 24 percent on average during the first half of this year, but the growth was still lower than the average 27 percent rise in Dubai crude oil prices, and the 30 percent rise in Brent North Sea crude in the same period.

Domestic fuel prices would have increased much more if the CPC had used another pricing index, Wang said.

Meanwhile, some CPC union members staged a protest outside of the ministry, accusing the Consumers' Foundation of misleading the public.

Union chief Chuang Chue-an (莊爵安) said that only with the floating fuel pricing mechanism could the principle of fairness be realized through the concept of the "consumer pays."