Hikiko:
As one of the world's major economies, China's energy supply security is directly related to the national economy and people's livelihood. The trend of domestic refined oil prices is an important indicator to measure the fluctuation of energy prices. Since 2024, domestic gasoline and diesel prices have risen in successive rounds, bringing a lot of burden to people's lives and business operations. However, with the recent decline in international oil prices, domestic refined oil prices are likely to "usher in a downward adjustment" again next week, becoming a temporary "rest stop" for the rising market.
Domestic oil prices have risen fiercely
Looking back at the price trend of refined oil in 2023, we will find that the increase is not large, with the cumulative increase in gasoline prices for the whole year by about 240 yuan/ton, and diesel prices by about 280 yuan/ton. However, after entering 2024, the rise in domestic oil prices has accelerated significantly.
Since the end of January, as of mid-to-late April, in just four months, domestic gasoline prices have been raised five times in a row, with a cumulative increase of 925 yuan/ton; Diesel prices have also experienced 5 rounds of increases, with a cumulative increase of 870 yuan/ton. Among them, domestic oil prices in March and April experienced two rounds of sharp increases of about 200 yuan per ton.
This rate of increase in oil prices can be said to be quite ferocious in history. Taking No. 92 gasoline as an example, the current price in Shanghai has risen to 8.13 yuan per liter, nearly 1 yuan higher than the recent high. Such a continuous rise in oil prices not only brings a heavy burden to the majority of car owners, but also poses a lot of pressure on the operating costs of small and medium-sized enterprises and the logistics industry.
Multiple factors have led to a surge in oil prices
So, what is the reason for the fierce rise in domestic oil prices since 2024? From a large point of view, it is mainly affected by the fluctuation of international oil prices.
Since the second half of 2023, international oil prices have remained at a relatively high level of $70-85 per barrel due to multiple factors such as Russia's production cuts and turmoil in the Middle East. After entering 2024, the supply of crude oil in local areas such as Libya will be further blocked, and the supply shortage will intensify, and oil prices will rise further. In mid-March, the international oil price once approached a high of 90 US dollars per barrel, and the corresponding domestic refined oil prices were naturally "pulled up".
In addition, the arrival of the peak season for domestic refined oil consumption after the Spring Festival is also an important driver of rising oil prices. March to May is the peak season for domestic gasoline and diesel consumption, and increased demand tends to push up oil prices.
On the other hand, with the revision of the oil price adjustment mechanism in 2024, the transmission effect of international oil price fluctuations on domestic oil prices will be further enhanced. According to the new price adjustment mechanism, as long as the international oil price fluctuates up and down during the pricing period and reaches the "threshold" of 55 yuan per ton, the domestic oil price will be adjusted accordingly, and the transmission efficiency will be greatly improved. This is also an important reason why domestic oil prices will "rise" in 2024.
Oil prices may fall after peaking
However, any overheated market will not last forever. At present, international oil prices have begun to show signs of falling, which also makes domestic oil prices finally expected to "return to the downward adjustment" next week.
The main reason for the recent decline in international oil prices is that oil-producing countries are increasing production and market supply has been loosened. Last week, a number of major OPEC+ oil producers eased their production cuts and increased crude oil exports. In addition, U.S. shale oil production continued to recover, and the overall crude oil supply was expected to be sufficient. In this context, international oil prices have continued to fall since mid-April, and have fallen by nearly 4% so far this round.
Under this influence, according to the current refined oil pricing mechanism, the domestic price of No. 92 gasoline is expected to be reduced by about 80 yuan/ton next week, and the price of No. 0 diesel is expected to be reduced by about 90 yuan/ton, which is equivalent to a retail price of about 5-7 cents per liter. Although the magnitude is limited, it has finally stopped the momentum of soaring oil prices.
However, in order to completely reverse the rise in oil prices, it is obvious that a more obvious decline in international oil prices is needed. Whether this can be achieved will depend on the future trend of the global economy and the supply policies of major oil-producing countries. The market generally expects that once the global economic recovery momentum slows down and inflationary pressure eases, there is still room for further decline in international oil prices in the short term. But if major producers tighten production again to protect their interests, a new round of oil prices could also occur.
Many parties are focused on the energy revolution
In the face of the ups and downs of energy prices, the downstream demand side naturally needs to increase energy conservation and consumption reduction, but this is only a stopgap measure after all. Fundamentally, only by promoting the revolution in energy production and consumption, improving energy efficiency, and realizing clean and low-carbon energy substitution is the real way out.
Both the government and businesses are stepping up their efforts to invest in this. On the one hand, in recent years, the mainland has made major breakthroughs in unconventional oil and gas fields such as oil and gas exploration and exploitation, shale oil and gas, and its ability to guarantee energy supply has been continuously enhanced. In 2024, mainland natural gas production is expected to exceed 230 billion cubic meters, more than double the number a decade ago. On the other hand, the new energy industry is also developing rapidly, and the installed capacity of new energy sources such as wind power, solar energy, and biomass power generation is expanding.
On the energy consumption side, the vigorous development of the clean energy vehicle industry is a bright spot. In 2023, the production and sales of new energy vehicles in mainland China will exceed 10 million units, ranking first in the world, helping to reduce oil consumption and emissions. In addition, in the fields of construction and transportation, energy-saving technological transformation and management methods are constantly innovating, and energy utilization efficiency is also continuously improving.
At the same time, the government is also vigorously promoting green travel and low-carbon living. In some large cities, green and low-carbon travel modes such as walking, cycling, and subway travel are receiving more and more attention. Reducing energy consumption at the source is undoubtedly an effective way to mitigate the impact of oil price fluctuations.
However, the revolution in energy production and consumption will not be completed overnight, and will require the joint efforts of the whole society. Starting from the individual, cherishing resources and being diligent and thrifty are the basic obligations that every citizen should fulfill. Only in this way can we truly get rid of our dependence on fossil energy and usher in a new era of low-carbon and green energy.
Overall, while refined oil prices are expected to take a breather next week, energy prices will remain volatile in the medium to long term. We must attach great importance to energy security, promote the energy revolution, and achieve a clean and low-carbon transition, so as to ultimately mitigate the impact of oil price fluctuations.
The state attaches great importance to energy security
As an energy powerhouse, it is conceivable that the Chinese government attaches great importance to energy security. In recent years, the mainland has continuously increased domestic oil and gas exploration and development, actively promoted the transformation and upgrading of the energy structure, vigorously developed new and renewable energy, and enhanced its energy supply guarantee capacity in an all-round way.
From the perspective of top-level design, in 2022, the State Council issued the "New Strategy for Energy Security", which clearly stated that by 2025, the dependence on mainland oil imports will be controlled within 70%, and the proportion of non-fossil energy in total energy consumption will exceed 25% by 2030. This shows that the mainland is promoting a new layout of energy security in an all-round way.
In terms of specific measures, the first is to increase exploration and development, and strive to improve the self-sufficiency rate of oil and gas; the second is to accelerate the construction of a diversified supply system and expand supply channels; the third is to vigorously develop new and renewable energy, optimize and adjust the energy structure; Fourth, strengthen scientific and technological innovation and promote the development of emerging industries such as smart energy.
At the end of 2023, the state will issue the "Opinions on Accelerating the Cultivation and Expansion of New Energy Industries", proposing to vigorously develop new energy industries such as wind power, photovoltaic power generation, biomass energy, geothermal energy, and marine energy to promote the rapid growth of new energy consumption. At the same time, vigorously develop energy storage and smart grids to create good conditions for the development of green and low-carbon energy.
Demand-side management is indispensable
Energy security requires not only ensuring supply, but also strengthening demand-side management and improving energy efficiency. From this point of view, it is also important to conserve resources and reduce waste.
In recent years, the mainland has vigorously carried out energy conservation and emission reduction actions. Strict mandatory standards for energy conservation have been formulated, the use of high-efficiency and energy-saving technology, equipment and products has been promoted, and energy-saving management of key industries and fields has been strengthened. Especially in key areas such as industry, construction, and transportation, a series of energy-saving measures have been launched to achieve good results.
Taking the industrial field as an example, the state continues to implement industrial energy and resource conservation actions, promotes the application of contract energy management, industrial energy-saving technological transformation and other models, and continuously increases the comprehensive utilization of resources. By 2021, the energy consumption of industries above designated size in mainland China will be reduced by 57.3% compared with 1990, and the energy consumption per 10,000 yuan of industrial added value will decrease by 2.6% year-on-year.
In the field of transportation, the mainland has vigorously developed a green transportation system, accelerated the promotion of the use of new energy vehicles, and advocated public transportation and low-carbon travel modes. As of 2022, the proportion of public transportation trips in the country exceeded 35%, and the number of new energy vehicles accounted for more than 19% of the total number of motor vehicles.
It can be said that the mainland's energy security and conservation work has achieved remarkable results, laying a solid foundation for mitigating the impact of oil price fluctuations. But at the same time, we must also be soberly aware that traditional fossil energy will still be the main force in the long term, and the pressure on energy supply guarantee still exists. Therefore, we must not relax in the slightest, and we must make unremitting efforts to continue to promote the energy revolution and energy conservation and consumption reduction, and finally realize the organic unity of energy security and environmental friendliness.
In short, to reduce the impact of oil price fluctuations, it is necessary to exert efforts on the supply side to achieve energy security; It is also necessary to make efforts from the demand side to deepen energy conservation and emission reduction. Only by attaching equal importance to both supply and demand and forming a joint force can we truly reduce the impact of oil price fluctuations on the national economy and people's lives. Let us work together to achieve this goal.