MOEA may lift oil price cap after April

The Ministry of Economic Affairs may lift price caps on fuel prices after next month and revise the floating oil price mechanism as losses at state-run oil and utility companies grow.

State-run CPC Corp, Taiwan (CPC, 台灣中油) and Taiwan Power Co (Taipower, 台電) are losing NT$7 billion (US$232.6 million) and NT$12 billion respectively each month as a result of the government freeze on domestic fuel prices, Minister of Economic Affairs Steve Chen (陳瑞隆) said yesterday at the legislature's Economics Committee.

Domestic fuel prices have been frozen since December.

Chen said that the ministry would gauge public opinion and revise the oil pricing mechanism at an appropriate time. But prices for next month will remain unchanged, he said.

Asked about his opinion on the Cabinet's announcement on Monday that the freeze on local fuel and utility prices would continue until May 20 -- when the new president is inaugurated -- Chen said that CPC and Taipower should still be able to bear the losses in the short-term, but from the ministry's perspective, he hoped that the price caps could be lifted before then.

CPC chairman Pan Wenent (潘文炎) said yesterday that based on the US Department of Energy's (DOE) estimates, international crude oil prices could drop from US$102 per barrel to US$89 per barrel in December, putting the average price per barrel at US$94.

widening losses

"If the price caps continue, CPC estimates that losses could grow to NT$83 billion by the end of the year, which I am afraid CPC will not be able to bear," Pan said, adding that total losses would then exceed more than half of the company's registered capital of NT$130 billion.

CPC's losses this year could further expand to NT$110 billion if prices were based on current Western Texas Intermediate's (WTI) oil price of US$106 per barrel, Liao Tsang-long (廖滄龍), deputy director of CPC's industrial relations division, said yesterday.

Losses at Taipower could reach NT$110 billion by the end of the year if utility and fuel prices remain frozen, Taipower chairman Edward Chen (陳貴明) told legislators yesterday.

These could jump to NT$150 billion if CPC were allowed to hike fuel prices but utility prices remained the same, Chen said.

price hikes

Liao said if CPC were allowed to raise prices next month, it would hike gasoline prices by NT$4 per liter and diesel prices by NT$4.5 per liter.

However, if the local currency's appreciation were taken into account, the price hike could be reduced by NT$1.1 per liter to NT$2.90 and NT$3.40 respectively, he said.