Thu, Sep 05, 2002 page10

• Stakes rise in war over fuel prices

  CRYING FOUL A move by National Petroleum to cut prices by NT$2.5 per liter has drawn complaints that the chain is pursuing a zero-profit price strategy

  • By Richard Dobson / STAFF REPORTERWITH REUTERS
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  More gas stations in central Taiwan were drawn into an escalating price war at the gas pumps yesterday with the Hsin Yi (信毅加油站) chain in Taichung dropping its prices by NT$2.5 per liter, the largest yet.

  The broadening cuts in central Taiwan, which began Monday when National Petroleum Corp (全國加油站) slashed prices, drew a strong response from the Taiwan Provincial Association of Gas Stations (台灣省加油站聯合會), which said the move by National was anti-competitive.

  A spokesperson for Hsin Yi, which is a privately operated gas-station chain supplied by Formosa Petrochemical Corp (台塑石化), told the Taipei Times it would drop its prices by NT$2.5 at five stations around Taichung City and Taichung County from 6pm yesterday.

  This reduction undercut that of both National Petroleum, which on Monday dropped its gasoline prices in 19 stations across central Taiwan by NT$2 per liter and 48 Chinese Petroleum-supplied stations that lowered prices at 48 stations yesterday by NT$2.2 per liter.

  A National spokesperson said yesterday that the price cuts would remain in place for an as-yet undetermined period.

  Foreign-backed newcomer Esso Petroleum Taiwan Inc (台灣埃索), which supplies 20 stations around Taiwan, yesterday decided to slash prices on gasoline by NT$2.2 per liter at all of its stations, effective today.

  Unlike the other gas stations, Esso Petroleum Taiwan imports its own oil, stored temporarily in seven storage tanks at Taichung Harbor. Eighty percent of the company's stations are located around central Taiwan where the price war is being fought.

  The Caltima Corp (加得滿) gas station chain, which is supplied by Chinese Petroleum, also joined the fray yesterday, announcing it would drop prices at four stations around Taichung by NT$2.2 per liter for 95 unleaded gasoline.

  But according to Lin Hsien-ming (林獻銘), director of the provincial gas station association, the cuts by National on Monday that led to the price war were in violation of fair trade practices.

  At an extraordinary meeting of gas station owners from Taichung, Changhua, Nantou and Yunlin, Lin said it was agreed that National's low pricing policy was anti-competitive as it was operating on a zero profit from the sales promotion.

  The profit margin on gasoline sales is around NT$2.5 per liter, according to Lin. As National had cut prices by NT$2 and was giving away handouts valued around NT$0.5, it was using a zero-profit strategy to compete, he said.

  Lin also alleged that National was afforded preferential wholesale conditions by Formosa, although this could not be verified.

  The Cabinet-level Fair Trade Commission chipped in on the price war, but from a different angle, warning the oil market's main suppliers -- Formosa and Chinese Petroleum -- not to interfere with the pricing policies of their customers.

  Lin Yi-yu (林益裕), secretary-general of the Fair Trade Commission, said yesterday that neither Formosa or Chinese Petroleum could use their position as oil suppliers to try and influence National's pricing policy.

  Lin was quoted by local media as saying, "National's price cuts are a sales strategy in a free and liberalized market, and neither Chinese Petroleum or Formosa have the right to try and force it to fix its prices at a set level."

  Lin said that they could instead renegotiate wholesale prices with their customers, which are either directly operated gas stations or independently operated franchise stations, to cut gasoline purchase costs.

  "Any move by either company to influence National's prices or boycott selling to the chain would be considered an anti-competitive trade practice and a breach of Taiwan's fair trade laws," said Lin.

  Despite the price cuts, gas stations may soon see any losses erased by lower international prices for oil.

  Oil prices fell sharply on Tuesday after a report showed producer group OPEC cheating heavily on output limits and as Iraq continued a diplomatic offensive to avoid a military attack by the US.

  Weakness on the US stock markets also undermined confidence among oil traders worried that a slow world economic recovery could further hurt demand for oil. US crude oil prices fell US$1.19, or more than 4 percent, to US$27.79 a barrel for October delivery on the New York Mercantile Exchange (NYMEX), dipping below US$28 for the first time in two weeks.
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