Natural gas price rumors behind the rationalization of the price mechanism is the key

Recently, rumors about "a sharp increase in natural gas prices" touched the public's sensitive nerves. On the one hand, individual local governments "sneak" price increases, while on the other, the relevant government departments "high-profile" rumor. The increase in gas prices in Jilin Changchun and Hebei and Hebei provinces seems to confirm the news that "natural gas prices will rise sharply."

Liu Cheng, a professor at the School of Economics and Management at the Beijing University of Science and Technology, said in an interview that since natural gas is a kind of commodity, the price will follow the market and it is understandable that establishing a price linkage mechanism between upstream and downstream of natural gas is necessary. The public actually questions the opaque behavior of the existing natural gas price adjustment method. He said that the controversy caused by the price increase behavior in Changchun City and Handan City indicates that the current price adjustment mechanism is not perfect, and how to establish an open and transparent price adjustment mechanism is of utmost importance.

Profitability price increase?

Earlier, a report by the relevant media pointed out: "Most urban natural gas operations are not a loss, but they are huge profits; on the other hand, imported gas sources and long-distance pipelines are at a loss or a meager survival."

Beijing is the country's largest natural gas consumer city. There are four gas companies in the city, of which Beijing Gas Group supplies about 95%. At present, Beijing's natural gas supply is mainly from the Shaan-Jing pipelines. The gas sources are from near and far to Huabei Oilfield, Changqing Oilfield, Tarim Oilfield, and the right bank of Amu Darya in central Asia (Central Asia natural gas).

The China Economic Times reporter learned from the official website of the Beijing Gas Group that in 2012 Beijing Gas Group purchased 8.41 billion cubic meters of natural gas, with sales of 7.94 billion cubic meters, an increase of 22.6% and 22.8%, respectively. Based on the current sales price of natural gas in Beijing at 2.28 yuan/cubic meter, Beijing Gas Group achieved operating revenue of 17.11 billion yuan, an increase of 24.1% year-on-year, and a total profit of 2.13 billion yuan, a year-on-year increase of 13.3%.

Cao Aunt, who is in her 60s, has been living in Beijing. Aunt Cao gave reporters the natural gas bills that her family purchased from 2006 to 2013. It clearly records the increase in natural gas prices in Beijing in recent years: it was 1.9 yuan per cubic meter before and after 2006, and after 2007 it was 2.05 yuan per cubic meter, the end of 2012 was 2.28 yuan per cubic meter.

Thus, from 2006 to 2013, the price of natural gas in Beijing rose from 1.9 yuan to 2.28 yuan per cubic meter, an increase of 0.38 yuan, the increase rate is about 20%.

“The spending power of the people must follow the fluctuation of the rising prices. If the people’s spending power is weak, even if they only increase a little, then the spending power will not be able to keep up,” said the industry source.

The rumors of perfecting the price linkage mechanism and imposing price increases on natural gas are seen by many as a “trailer” for natural gas price reforms. In recent years, due to the inversion of domestic natural gas prices, relevant parties have been brewing new pricing mechanisms for natural gas.

Analysts pointed out that as China's natural gas demand is rapidly increasing, if the supply of natural gas is to be ensured, then straightening out the existing price mechanism will become the key. Behind this natural gas price rumors, it should be a temptation to introduce a new mechanism for the formation of natural gas prices.

Since the winter of 2012, gas prices have been brewing in many places. Many cities in Beijing, Changsha, and Xuzhou have gradually adjusted the price of natural gas for residents at the end of last year. The "Natural Gas Utilization Policy" and the "Twelve Five-Year Plan for Natural Gas Development" previously announced clearly define natural gas price reform as one of the main goals of the price reform of resource products during the "12th Five-Year Plan" period.

In 2013, some cities in Jiangsu and Zhejiang also successively held hearings on residents' natural gas price adjustments and brewing gas prices. According to analysts, in recent years, the linkage between upstream and downstream prices of natural gas in China has lags behind, and downstream gas companies have called for price hikes to some extent “reasonably”.

Analysts pointed out that behind the price reform is the rapid increase in domestic natural gas demand and cost inversion. To ease the shortage of domestic gas, the number of China's natural gas imports has increased year by year. It is imperative to rationalize the natural gas pricing mechanism.

At present, the natural gas industry is monopolized by state-owned enterprises. If it does not break the monopoly of the upper reaches and breaks down the barriers to entry in the upper reaches and allows all kinds of capital to enter, then it will be very difficult for natural gas to truly move into the market. The price change of natural gas is also difficult to choose by market competition, and the person who ultimately pays for natural gas prices is the end consumer.

“The natural gas price reform is slowly opening.” Zhou Cuiping, gas analyst at Business Club, believes that the trial price reform of natural gas in China is expected to further expand in the next three years, and the price-price relationship between natural gas prices and alternative energy sources is expected to gradually straighten out. The downstream price linkage mechanism is expected to perform more smoothly.