TAIPEI — The Ministry of Economic Affairs (MOEA) said yesterday that it will review its policy of having state-run petroleum refiner CPC Corp. Taiwan (CPC) absorb part of the rise in crude oil prices when pricing gasoline sold locally.
“We will meet this week to review the policy,” said an economics official who spoke on condition of anonymity because of the sensitivity of the matter.
With the European Union banning oil imports from Iran, the price of crude oil could hit US$150 a barrel, and the ministry needed to prepare for such a contingency, the official said.
“The ministry needs to review the current measures and come up with new proposals,” he said.
CPC Vice President Chen Ming-hui said the current approach of having CPC absorb half of any increase in crude oil prices above US$100 per barrel, with the other half being passed on to consumers at the pump, had cost the company NT$28.5 billion in revenue in 2011.
The measure, which was put into practice on Dec. 6, 2010, was part of the government’s effort to stabilize consumer prices as crude oil prices rose above US$100 per barrel.
Chen said CPC, which posted a loss of NT$38.7 billion in 2011, was charging NT$3.7 less per liter of gasoline and diesel as of Jan. 29 than it would have if prices were determined by market forces.
For every NT$0.1 per liter the company absorbs rather than passes on to consumers, CPC stands to lose an additional NT$1.2 billion a year, Chen said.
The economics official said that to stem CPC’s losses, the ministry would have to carefully review the existing measure and could possibly allow prices at the pump to rise to reflect high crude oil prices.
“Reverting to a market mechanism would be the norm,” the official said, adding that the ministry hopes CPC will not have to lose money on a long-term basis, which he said would not be good for the country or the company, which has a debt ratio of nearly 70 percent.