PetroChina, Sinopec ask government to reduce fuel consumption tax

In 2009, China raised the consumption tax on fuel as part of a fuel pricing reform initiative.  As the price of crude oil has continued to rise, the effect of the consumption tax has been disastrous for the company’s biggest oil refiners, PetroChina and Sinopec.  In an effort to reduce their refining losses, both companies have requested that the Chinese government cut the current fuel consumption taxes.  In the first quarter of 2011, Sinopec paid approximately US$4.67 billion in consumption tax for both gasoline and diesel fuel.  PetroChina reportedly paid US$3.5 billion in consumption tax during the same period.  Crude oil prices are currently higher than the government-set retail prices for gasoline and diesel fuel, which cuts profits for refiners. Both refinery giants, PetroChina and Sinopec, have reported major losses in their refinery business in the first quarter of 2011, US$944 million and US$88.7 million, respectively.  Sinopec is also reporting that its inventory of crude oil is depleted. (May 3, 2011)