New energy policy needed: CPC

State-run oil refiner CPC Corp, Taiwan (CPC, 台灣中油) yesterday said it hoped the new government would adopt a more reasonable energy policy by scrapping the four-month-long approach of freezing local fuel prices in an attempt to stop widening losses.

"The price of oil is not the only thing to blame for rising consumer prices," Liao Tsang-long (廖滄龍), deputy director of industrial relations for CPC, said by telephone yesterday. "We hope the government will seek a more reasonable solution. The oil price should be decided by the market mechanism."

The CPC is expected to post less of NT$20 billion (US$654.7 million) in the first three months and to expand to NT$42 billion in the first half of the year, if the oil retail price stays at the current level.

Without a rate increase to compensate for the hike in fuel costs, the state utility, Taiwan Power Co (Taipower, 台電), is also expected to see losses increase to NT$50 billion by the end of June, Minister of Economic Affairs Steve Chen (陳瑞隆) said on March 12.

Taipower last raised its rates by 5.8 percent in July 2006, which was the only increase since 1983.

"It is not common for oil companies like CPC to post constant massive losses," Liao said.

The fuel price measures did not accomplish the CPC's goal of easing price pressure on the public, he said, as the government subsidized big oil consumers, not average consumers.

The company's remarks came ahead of a Ministry of Economic Affairs meeting this week to review the government's oil price policy. The new measure will take effect on April 1, a ministry official said yesterday.

"The ministry will come out with a decision in a meeting next [this] week," the official, who requested anonymity, said.

The Central News Agency said earlier yesterday that the ministry was considering ending the price freeze measure and resuming the mechanism of fluctuation based on global oil prices.

The report also said that the CPC may raise fuel prices as high as NT$4 per liter to make up its losses over the past few months.

Liao declined to comment yesterday on the speculation, saying that the range of price hikes is up to the government.

If the CPC decided to allow its fuel prices to fully reflect the rise in costs, it would drive the prices of 95 unleaded gasoline, the most popular gasoline, from NT$30.7 per liter to NT$34.7 per liter.

In November, the government ordered CPC to hold its fuel prices unchanged, beginning in December, after the consumer price index (CPI) increased to a 13-year high in October.

In the first two months, the CPI reading has increased an average of 3.42 percent from a year ago, the Directorate General of Budget, Accounting and Statistics said earlier this month.

The inflation benchmark is expected to expand 3.89 percent for the full year, the agency said.

President Chen Shui-bian's (陳水扁) government had also adopted other measures to curb inflation.

More changes, however, are expected, as president-elect Ma Ying-jeou (馬英九) has said that he would form a new task force to combat rising consumer prices, which is seen as a key challenge for the next Cabinet.

Also see: EDITORIAL: Ma faces many challenges