The nation’s two refiners said yesterday they were raising gasoline and diesel prices to reflect rising fuel costs triggered by the continued political unrest across the Middle East and North Africa, lifting domestic fuel prices to their highest levels in 30 months.
While state-run CPC Corp, Taiwan (CPC, 台灣中油) will partly absorb the rise in prices to help stablize consumer prices, the company might see its balance sheet go from black to red next month, a company official said.
Prices of gasoline products would be hiked by NT$0.7 per liter and by NT$0.8 for various diesel items, both CPC and Formosa Petrochemical Corp (台塑石化) said in their statements. The new rates come into effect today.
Under CPC’s pricing mechanism, which links domestic fuel rates to Dubai and Brent crude oil prices, its average crude oil cost rose US$6.94 per barrel to US$106.71 last week from US$99.71 the previous week, after both Dubai and Brent crude surpassed US$110 per barrel.
Coupled with the NT dollar’s recent weakness against the US dollar, the gasoline prices should have gone up by NT$1.4 per liter and NT$1.5 on diesel to fully reflect the cost, CPC said.
However, to ensure the nation’s fuel rates are the lowest among neighboring Asian countries while helping stabilize consumer prices, CPC would absorb half of the cost, the statement said.
CPC vice president Paul Chen (陳綠蔚) said the company had no plan to freeze domestic fuel prices. However, the company’s effort to partly absorb the rising cost since Dec. 5 could lead to a loss of around NT$1 billion (US$33.6 million) for next month, Chen said.
“CPC reported NT$23.9 billion in profit last year, but the company still had an accumulated loss of NT$3.9 billion as of the end of last year over its 65 years in operation,” Chen said by telephone yesterday.
That was because the company reported a sizable loss of NT$138.7 billion in 2008 when the government ordered the state refiner to freeze fuel prices amid the continuous rise in global crude prices back then, he added.
Global crude prices rocketed to a record peak above US$147 a barrel in July, 2008. Prior to 2008, CPC had an accumulated profit of around NT$65 billion, Chen said.
If losses continue, CPC might see its credit ratings cut by international ratings agencies amid concerns over its financil profile, resulting in higher operating expenses for global crude purchases, he added.