Long Lines, Lost Profits: China's Regulated Fuels Market

Authors: Wong, K.; Stimson, M.
Source: Asia Case Research Centre
Year: 2006
Company Name: Petro China Company Limited, China National Offshore Oil Corporation, China National Petroleum Corporation
Number of pages: 26

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Abstract:

Hong Kong-based investment banking analyst Steven Chan travelled to the mainland province of Guangdong late in the summer of 2005 to tour new service stations built by a Chinese-Western oil joint venture. Concerned by reports of long lines at the pump in Shenzhen, his driver opted to fill the tank with 'expensive' Hong Kong gas before crossing the border. Prices of crude oil, unregulated in China, had recently increased far more than government-guided gasoline and diesel prices, squeezing the margins of local refiners. Rumour had it that independent stations were having trouble getting supply, and 'black market' trade was active. As they made their way up the Hong Kong-Guangzhou highway, Steven questioned the Western oil firm's strategy of aggressively entering a price-controlled market.