Longwei Petroleum To Benefit From PRC Fuel Price Increase
TAIYUAN CITY, China, March 22, 2011 /PRNewswire-Asia-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE Amex: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), announced today that it expects to benefit from the gasoline and diesel price increase enacted by China's National Development and Reform Commission ("NDRC") on March 20, 2012. The retail prices for fuel were raised for the second time this year, increasing 6.5% for gasoline and 7% for diesel, amid rising world crude prices and falling domestic inflation.
The increase of RMB 600 (approximately USD $95) per metric ton, the second increase in the past two months, is based on a pricing mechanism that allows the NDRC to adjust fuel prices when the cost of crude oil changes by more than 4 percent over a period of 22 working days. After the price increase, average diesel and 90-octane gasoline prices in the PRC will be approximately $4.62 and $4.43 per gallon, respectively. This compares to average fuel prices in the United States for diesel and mid-grade gasoline of $4.15 and $4.00 per gallon, respectively, according to the American Automobile Association ("AAA").
The PRC, the world's second-largest oil consumer, reported an overseas oil dependence ratio of 56% in 2011, according to the China Daily. "With rampant consumption in the spring ploughing season about to come and [the] volatile situation in the Middle East persisting, adjusting fuel prices in a timely manner was an important way to ensure domestic market supply and national energy security," the NDRC stated in a news release regarding the price increase.
"We have been using our working capital primarily to increase inventory and product availability based on anticipated price increases," stated Cai Yongjun, Chairman and CEO of Longwei. "We have been balancing our working capital to take advantage of pricing opportunities to improve margins, as well as balancing the funding required to complete our acquisition of the Huajie Petroleum assets."
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