Tue, Jul 31, 2007 - Page 1 News List

Government to stick to floating fuel price mechanism

By Ko Shu-ling and Shih Hsiu-chuan  /  STAFF REPORTERS

President Chen Shui-bian (陳水扁) yesterday said that the administration continued to support using a floating price mechanism for determining oil prices but would consider lowering the profit targets of the state-run oil company and other businesses.

Acting Presidential Office secretary general Cho Jung-tai (卓榮泰) yesterday said that Chen was not against the floating fuel pricing mechanism, in which the state-run CPC Corp, Taiwan (CPC) has, since September, linked domestic fuel prices to benchmark prices of West Texas Intermediate (WTI) crude oil in New York.

The president simply voiced his concern in the hopes that the sharp fluctuations in oil prices would not add to public insecurity, Cho said, and that all state-run businesses, including CPC, could be more flexible in setting their profit targets.

As oil prices are related to these profit targets, Cho said Chen hoped these companies could lower their targets so there could be more room for oil price adjustments.

Cho made the remarks in response to a report published in yesterday's Chinese-language United Daily News which claimed that Chen did not support the floating price mechanism.

Cho said he had talked with officials in charge of these affairs, including Vice Premier Chiou I-jen (邱義仁) and Minister of Economic Affairs Steve Chen (陳瑞隆), saying Chen hoped to see them present a new format before the weekend.

Meanwhile, Chinese Petroleum Corp (CPC) Vice President Tsao Mihn (曹明) said yesterday that the company does not advocate suspending the floating price mechanism, but would "comply" with government policy as it is a state-owned enterprise.

The spokesman said that the company was willing to examine the impact of the mechanism on inflation, but denied that the move was in reaction to Chen's concerns.

"As a state leader, he can give the order, but I don't believe he would do so," Tsao said at a press conference hosted by a group of Chinese Nationalist Party (KMT) legislators.

Blaming the continuous hike in international crude oil prices for the CPC's decision to raise oil prices, Tsao said that the CPC was "out of luck" as world prices had been on the rise ever since the floating fuel price system came into effect.

Meanwhile, Democratic Progressive Party Legislator Huang Wei-cher (黃偉哲) said the KMT's demand that the CPC should have a budget surplus of NT$18 billion (US$545.8 million) this year was the reason behind the hike in domestic oil prices.

When the CPC's budget request for this year was reviewed at the legislature, KMT lawmakers proposed changing the company's estimation of a loss of NT$3.4 billion to a surplus of NT$18 billion, which was subsequently approved by the KMT-dominated legislature.

Huang slammed the KMT for the rise in oil prices, saying the CPC had no choice but to raise its oil price in order to meet the profit requirement.

Meanwhile, in response to concerns about rising commodity prices, Premier Chang Chun-hsiung (張俊雄) said that he had ordered a group under the Ministry of Economic Affairs to consider regulating the prices of 180 imported raw materials.

The premier said that rising consumer prices and the price of water supply for domestic consumption will be discussed in tomorrow's weekly Cabinet meeting.

"We hope to come up with effective solutions," he said.

"The rise in oil price is a result of hiking international crude oil prices and market mechanisms, but the government also cares about public concerns and rising costs," Chang said.

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