SunSirs: How will the Unified Consumption Tax on Multiple Oil Products affect Gasoline and Diesel?

On June 30, 2023, the State Taxation Administration issued Announcement No. 11 of 2023, which unifies the policy of levying consumption tax on a variety of raw materials including mixed aromatics.

After the announcement was released, it mainly drove the price of gasoline significantly. According to the Commodity Market Analysis System of Business Society, the price of 92 # gasoline in China on the 6th was 8,730.8 RMB/ton, an increase of 2.97% compared to the 1st price; The domestic price of 0 # diesel is 6,894.6 RMB/ton, an increase of 1.30% compared to the previous day's price.

Cost side: The international oil market is rising, with significant cost support

In July, the crude oil market prices fluctuated and rose. As of the 5th, the settlement price of the main contract for WTI crude oil futures in the United States was at $71.79 per barrel, while the settlement price of the main contract for Brent crude oil futures was at $76.65 per barrel. On the one hand, OPEC, an oil producing country, has deepened production cuts to boost market confidence. Saudi Arabia has voluntarily extended the production reduction deadline of 1 million barrels per day, while Russia has voluntarily lowered its August export volume by 500,000 barrels per day. The news of production cuts has boosted the oil market. On the other hand, data from the American Chamber of Petroleum (API) showed a significant decrease in US inventory last week, supported by demand during the summer oil peak season, and an increase in international oil prices. Recently, the crude oil market prices have risen, and the linkage between the refined oil market and crude oil prices is relatively strong. The rise in costs is beneficial for the domestic refined oil market.

Supply side: Shandong local refining production slightly declined

Recently, the operating load of refineries in China has been around 71%; Shandong independent refineries have slightly lower operating rates, with an operating rate of around 60.5%. In terms of local refining supply, there has been a slight decline, partially supporting the price of refined oil; The main refinery maintains high load operation and high supply levels. From January to May 2023, the cumulative domestic gasoline production was 64.658 million tons, a year-on-year increase of 3.29%; The cumulative production of diesel is 89.307 million tons, an increase of 20.3% year-on-year. In the first half of the year, the domestic production of refined oil increased year-on-year.

Demand side: gasoline demand still has support, diesel demand is in the off-season

In terms of gasoline, with the emergence of hot weather, summer outings have increased, the usage rate of private car air conditioning has increased, and there is a guarantee of gasoline demand. The collection of consumption tax has a strong support for gasoline, leading to a rise in gasoline market prices. In terms of diesel, many parts of the country are experiencing an increase in hot weather, with limited construction of outdoor industries, mines, and infrastructure. In addition, due to the impact of the rainy season in the south, agricultural oil consumption is gradually coming to an end, and diesel demand is weak, limiting the growth of the diesel market.

The global oil market is still a long short game, and the news of production cuts will boost the crude oil market. However, there are still interest rate hikes by European and American central banks, and the oil market still faces challenges. In the short term, the crude oil market may remain volatile. In terms of domestic supply, the operating rate of local refineries has slightly decreased, and the main refineries have maintained their operations. The supply of finished oil is relatively stable. In terms of demand, with the rise of temperature, the use of automotive air conditioning oil has increased, and gasoline consumption has been supported. However, the impact of policies is limited, and it is expected that the gasoline market will continue to rise under significant pressure in the future; In terms of diesel, due to the impact of high temperatures and rainy weather, the outdoor operation rate may continue to decline, and demand support is insufficient. It is expected that there is a risk of a decline in the diesel market.

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