The government is considering revising the floating oil price mechanism to factor in the impact of oil price hikes on the public, an official said yesterday.
Vice Premier Paul Chiu (邱正雄) has instructed the Ministry of Economic Affairs (MOEA) to study possible revisions to the mechanism to “appropriately” reflect the purchase price and reduce hardship caused by high oil prices, Council for Economic Planning and Development Chairman Chen Tain-jy (陳添枝) said.
Chen made the remarks at a press conference held after a weekly meeting of the Cabinet task force on commodity price stabilization convened by Chiu.
No specific ways were mentioned as to how to adjust the mechanism, but Chiu said that there were many “options” available that could help the ministry achieve its goals, Chen said.
Canceling the freeze imposed on domestic fuel prices by the former administration for six months.
Despite the sharp surge in international oil prices, the government canceled the six-month freeze on domestic oil prices when it took office in May and reinstated the floating oil price mechanism. It has adjusted the price upward on a monthly basis since then.
The floating oil price mechanism links domestic fuel prices to benchmark prices of West Texas Intermediate crude in New York, which the MOEA-owned CPC Corp, Taiwan (台灣中油) uses to adjust oil prices on the first day of each month.
Concerns have been raised over the growing inflation threat caused by continuous rises in the price of oil, which reached a record of US$147.27 a barrel on July 11.
The developments prompted the government to review the floating oil price mechanism, but Chen said it would not consider imposing a freeze on oil prices again as “there is no better way to force the price of oil down than restraining oil demand via high oil prices.”
“It’s necessary to maintain the floating oil price mechanism ... But what percentage of the increase in international oil price should be reflected in the domestic prices and whether to adjust the oil price on a weekly basis instead of monthly are possible options,” Chen said.
Chen said that reviewing oil prices once a week could prevent possible hoarding when the international oil price goes up and consumers could benefit from a price reduction within a short time frame when prices go down.
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