Crude oil prices and refined oil prices
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There has been a question that has puzzled me for a long time: International crude oil prices have kept falling – they used to be as high as $120 per barrel, but now they have dropped to $40 per barrel. Logically, since the cost of raw materials for refining oil products has decreased significantly, the drop in the price of those finished oil products should also be substantial. So why isn’t the oil refining industry profitable? Why are there refineries that are shutting down or reducing their production? What is causing the downturn in this industry? If anyone knows, please tell me!
The refining industry is in a downturn, affected by the overall economic environment.
The profit margin is too low, especially when market demand is weak – people prefer to buy when prices are rising rather than when they are falling.
As crude oil prices drop, the prices of refined petroleum products also fall. However, crude oil production has a lag in its production cycle; if prices keep falling, refineries will continue to suffer losses, as mentioned by President Yu upstairs.
Firstly, the proportion of crude oil costs in the costs of refined petroleum products is actually quite small, estimated to be between 25% and 35%. The rest include crude oil transportation, crude oil storage, crude oil processing, refined oil storage, refined oil distribution, and refined oil sales. All the costs associated with these steps are ultimately added to the price of the fuel. Oh, in my country, there are also taxes. So, even though oil prices haven’t dropped, it might seem as though refineries are making huge profits, but that’s not the case. Secondly, the downturn in the refining industry is mainly related to the overall economic climate. A few years ago, China’s economy grew at a rapid pace, and a large number of projects were carried out. Over the past two years, economic growth has slowed down, resulting in some overcapacity and contributing to a downturn in the overall oil refining industry. Finally, there is no finality........
Oil prices haven’t dropped; **taxes have been increased**. It has nothing to do with oil refining companies ； Furthermore, refining companies cannot import crude oil directly; they must purchase it from certain state-owned enterprises. What do you think the costs will be like
The explanation on the sixth floor makes a lot of sense. In the production costs of refined oil, the price of raw materials accounts for only a portion of these costs. Moreover, the price of refined oil decreases as the price of crude oil falls – it has dropped from around 8 yuan to just over 5 yuan. Additionally, domestic consumption is weak at present, there is an excess capacity in the refined oil industry, and the market is highly saturated. Along with other factors such as environmental pressures and safety regulations, most domestic refineries are operating poorly and suffering losses, while smaller refineries have simply closed down.
You are referring to the prices of crude oil futures, which have standard levels. Currently, crude oil is cheap; in China, people use lower-quality oil for processing, but it’s not easy to find such low-quality oil these days! So, it’s just a matter of waiting for shutdowns and reduced production!