The Ministry of Economic Affairs (MOEA) said yesterday it respected a legislative resolution to impose a ceiling on domestic gasoline and diesel prices at certain levels, while state-run CPC Corp, Taiwan (CPC, 台灣中油) said it would evaluate the measure’s impact on its balance sheet.
The ministry and the state-run oil refiner’s responses came after the Legislative Yuan’s Economics Committee passed a resolution on Wednesday asking the ministry to cap prices of 95-octane unleaded gasoline at NT$32.5 per liter and NT$28 per liter for premium diesel to help ease the impact of rising oil prices on low-income households.
The 95-octane unleaded gasoline is currently priced at NT$30.8 per liter and premium diesel is sold at NT$27.6 per liter at stations run by CPC and rival Formosa Petrochemical Corp (台塑石化).
“The MOEA respects the Legislative Yuan’s opinion for a review of the floating oil price mechanism after lawmakers expressed concerns about the financial burden of the rising oil prices on people,” the ministry said in a statement yesterday.
Stressing that oil prices should be decided by the market mechanism, the MOEA said it already established a special task force within the ministry to review the floating oil price mechanism and, if necessary, it would act in accordance with the conclusions reached in April’s National Energy Conference to mitigate the impact of rising oil prices.
The Economics Committee’s resolution — which will become binding after it passes a second and third reading in the following legislative sessions — suggested the MOEA either freeze prices or hike prices by a smaller size than the rises in global oil prices.
Taiwan only began to allow domestic fuel prices to adjust according to world oil prices in May last year, after the former Democratic Progressive Party government imposed a four-month price freeze.
CPC first adjusted its domestic prices on a monthly basis, but changed it to weekly adjustments after August last year to better reflect market prices.
CPC spokesman Lin Maw-wen (林茂文) yesterday said the company respected the committee’s resolution and would assess the possible impact on its bottom line, but added that it was too early now to talk about freezing fuel prices.
He cited company president Chu Shao-hua (朱少華) as saying that CPC would consider a price freeze only when global crude oil prices top US$100 per barrel, compared with about US$80 per barrel in recent trading.
Tine Olsen, economist at Moody’s Economy.com in Sydney, however, said cheap fuel prices would prevent fuel users from migrating to green technology and encourage over-consumption.
“The potential freeze is popular among consumers and businesses, and it could help to lift sentiment on the island. But consumer sentiment is already recovering, so a boost from expensive fuel subsidies may not be worth the cost,” Olsen said in an e-mailed statement yesterday.
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