A mechanism should be set up to connect domestic oil prices with the international market, says a signed article in Shanghai Securities News. An excerpt follows:
Director of the Centre for International Energy Security with Renmin University Zha Daojiong recently said oil companies needed large profit margins to fund technological development and improve their refining ability. He said: "There is no need to lower domestic price for refined oil products to realize sustainable development of energy resources."
Using such logic, there is no need to lower call charges because telecommunication enterprises need to realize sustainable development; there is no need to reduce housing prices because real estate enterprises need to realize sustainable development and there is no need to reduce medical treatment costs because the hospitals want to realize sustainable development. All trades and industries that seek to enjoy sustainable development can use this as an excuse to increase product prices as they wish but not lower prices according to real situations. If every industry did this, how can our economy keep healthy and sustainable development?
Such logic is quite absurd. Domestic oil prices, though seemingly lower than international prices, are not low once other factors such as taxes and fees are considered. International oil prices move up and down and domestic prices should follow these curves too.
Oil prices directly affect the macro economy and related industries. If high oil prices create "sustainable development" for oil enterprises, other related industries will be harmed and pay higher costs. For example, Chinese airline companies have been using expensive aviation fuel and high fuel prices are no good for the sustainable development of the aviation industry.
International oil prices tumbled from the July 14 peak of US$78.40 a barrel to US$58 on October 4. The public call for a reduction of domestic oil prices put a pressure on the National Development and Reform Commission. But at the same time, the commission was facing pressure from oil companies.
The root of the problem is a lack of mechanism or rule that keeps domestic oil prices in line with international prices. As there is no rule or regulation to abide by, it is hard to lower oil prices. Compared with the public, oil companies have smoother channels to express their interest appeals and can affect related departments more directly. That is why domestic oil prices only rise with international price rise but not fall with international price cut.
The argument that there is no need to reduce domestic oil prices reminds us of the importance to establish a mechanism connecting domestic oil prices with international norms. Otherwise, public interests will be ignored.
